Why I Love These Fuddy-Duddy Companies

Why I Love These Fuddy-Duddy Companies

Regular readers will have noticed a recurring theme in recent issues of this letter.

I’ve been banging the drum on why you don’t have to buy stocks listed overseas to get exposure to fast growing markets beyond America’s borders.

That’s because there are plenty of U.S. blue chip names that have sizable sales exposure to these markets.

On Monday, I recommended you take a closer look at four companies that have an above average sales exposure to emerging markets (relative to the S&P 500 Index as a whole).

These were Intel Corporation (NASDAQ:INTC), Philip Morris International Inc. (NYSE:PM), The Coca-Cola Company (NYSE:KO) and Microsoft Corporation (NASDAQ:MSFT).

Today, I want to dig a little deeper into this topic. Because it is one of the best investment opportunities available to U.S.-based investors today.

This is especially true, if you’re the type of person who has no interest in checking the market everyday.

In other words, this is a great way to invest if you are looking for a solid platform to build the rest of your global investment portfolio around.

“Core” Versus “Satellite” Holdings

Your portfolio will contain different kinds of investments with different levels of risk and exposure to various geographical regions.

As regular readers know, I recommend spreading your investments around among stocks, commodities and currencies.

When it comes to stocks, one way to think of it is in terms of your “core” holdings and your “satellite” holdings.

Your core holdings should be solid companies with a global presence, a strong track record, a ubiquitous product, a winning brand and very little chance of failure.

The kind of company that can weather economic storms, in other words.

Satellite holdings can be a little riskier. A little more exotic. Satellite holdings have the potential to make you more profits. But the risk of losses is higher too.

How much of your stock market portfolio you give over to core holdings and satellite holdings is entirely up to you. But unless you are a very experienced investor, I recommend you stick mainly to core holdings.

Apart from anything else, these are the type of investments that will allow you sleep soundly at night. And there’s a lot to be said for sleeping soundly at night.

Does It Pay a Dividend?

What stocks do I recommend for your core holdings?

First, I recommend you choose stocks of companies that have high levels of sales exposure to the emerging world. For the simple reason that this is where the growth will be for the next decade and beyond, as incomes rise and emerging market consumers play catch-up to the West.

But what else should you look for?

Well, a decent dividend yield won’t do any harm.

Remember, some companies pay out dividends to shareholders. Dividends are a portion of a company’s earnings that the board of directors decides to pay to shareholders.

When a company has a high dividend yield (the amount it pays relative to its share price) it indicates that the company has solid earnings and is a relatively stable operation.

That’s because a company can’t afford to pay out dividends if it doesn’t have much profits. And because fast-growing companies tend to reinvest their profits to help maintain their growth rates.

Dividend payers tend to be fuddy-duddy type stocks. Perfect for core holdings, in other words.

These 3 Stocks Make Great “Core” Investments

Below I’ve taken three big-name American blue chip stocks that also pay decent dividends.

Importantly, all of these stocks also have a strong track record of raising their dividend payouts each year.

These are all solid stocks, in other words…with a twist. They all have high exposure to emerging market consumers.

I mentioned the first of these on Monday: The Coca-Cola Company (NYSE:KO).

This company gets more than 40% of its sales from emerging markets. It has a dividend yield of 2.79%. And it has a track record of dividend growth stretching back 49 years. It also has a rock-solid brand.

The second is the world’s largest consumer products manufacturer The Proctor & Gamble Company (NYSE:PG). This company’s brands are household names in most parts of the world. They include Gillette razors, Tide laundry detergent and Pantene shampoo.

Proctor & Gamble gets about 27% of its sales revenues from the emerging markets, has a dividend yield of 3.3% and a track record of dividend growth going back 55 years.

Finally, there’s the world’s largest health-care company, Johnson & Johnson (NYSE:JJ).

Johnson & Johnson is split into four divisions: pharmaceuticals, medical devices, diagnostics and consumer products. It has about a 10% exposure to emerging market sales, a dividend yield of 3.43% and a track record of raising dividends going back 49 years.

Each of these companies would make great core holdings for a long-term, conservative and emerging markets-focused portfolio.

They may be fuddy-duddy. But they will help you weather any future financial storms.

 

Further Reading

Comments Closed

Your Chance to Retire Overseas Now

Sign up for our free daily Postcard e-letter and we'll immediately send you a FREE RESEARCH REPORT on the most desirable —and cheapest— retirement havens available to you today.

Each day you'll learn about the best places to retire, travel, buy real estate and enjoy life overseas.

Enter your E-mail Address Below



We Value Your Privacy.