5 Stocks Worth Braving (KO INTC MMM KMB EMR) by Jack Hough KO

KO INTC MMM KMB EMR
Screens by Jack Hough (Author Archive)
5 Stocks Worth Braving
Heir to "Jackass" (and I mean that reverently), MTV’s new stunt show "Nitro Circus" treats viewers each Sunday night to a fresh half-hour of daring and idiocy (and I mean that appreciatively). Cast members dangle from helicopter skids, race tricycles at high speeds down winding hills or just put antlers on a chubby, shirtless pal and have at him with paint ball rifles. All this, with hope but no promise that the show will achieve the financial success of its predecessor.

That’s about what it feels like to buy stocks today. Once considered a place for safe money, General Electric (GE: 6.65*, -0.04, -0.59%) shares have lost four-fifths of their value in 17 months. Eastman Kodak (EK: 2.43*, -0.51, -17.35%) has shrunk to a point where it’s arguably free; its stock market value of less than $800 million is less than its last reported surplus of cash. “Buy low” says history, but somehow the antler stunt seems as safe, and as likely to yield a profit.

To boost your bravery (for the shares), improve your odds by shunning companies with heavy exposure to credit losses, especially on mortgages. One in five U.S. homeowners now owes more than their home is worth, and prices are widely expected to fall further. Also, favor companies with minimal debt and sales that, if not growing at the moment, are dipping only modestly.

And above all, look for rich dividends. Those are getting a bad name at the moment because a rash of companies have cut payments in recent weeks. But more have increased them. Among America’s 500 largest companies, 48 have boosted payments this year, nine more than have trimmed or quit them.

The five companies listed below seem like survivors that can keep the payments coming. Their yields top 4%, which is enough to double an investor’s money in 14 years, assuming flat share prices and reinvested payments.

Coca-Cola (KO: 38.17*, -1.56, -3.92%) pays 4%. The Warren Buffett holding is barely growing at the moment, but isn’t shrinking, either — except for its stock price, which has lost a third in a year. As a result, Coke now has a defensive valuation to match its defensive product line. Shares fetch less than 13 times earnings.

Intel (INTC: 12.49*, -0.27, -2.11%) might stay out of favor for a while. The offloading of processing power over the past decade from personal computers onto Internet servers has given consumers less cause for frequent upgrades. Still, Intel dominates its key businesses and invests heavily on research — something studies suggest is a pretty good predictor of earnings growth. The company holds more than 10% of its stock market value in spare cash and pays a 4.4% dividend.

Emerson Electric (EMR: 24.43*, -2.04, -7.70%) has aggressively lowered costs as world-wide demand for things like compressors, thermostats, motors and switches has slowed. As a result, the company remains solidly profitable and earns a handsome return on the capital it invests. Emerson is only modestly indebted and its dividend works out to about half this year’s forecast profits. Current yield: 4%.

Screen Survivors Ticker Company Industry Share
Price Market
Value
($mil.) Forward
P/E Yield
(%)
KO Coca-Cola Soft Drinks $38.83 89,835 12 4.2
INTC Intel Computer Chips 12.28 68,301 31 4.6
MMM 3M Conglomerate 43.12 29,916 10 4.7
KMB Kimberly-Clark Personal Products 46.10 19,074 11 5.2
EMR Emerson Electric Industrial Equipment 25.25 19,065 10 5.2


Jack Hough is an associate editor at SmartMoney.com and author of "Your Next Great Stock."