Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Tech Stocks for the Perfect Fiscal Cliff Defense

Companies / Tech Stocks Oct 04, 2013 - 01:30 PM GMT

By: Money_Morning

Companies

Michael A. Robinson writes: First, it was the mess in Syria.

Then we had to deal with the whole Team Bernanke "taper drama."

And now we're barreling into yet another "Fiscal Cliff" street fight.


With U.S. stocks trading at unsustainable highs, I can sympathize with those of you who look at these headlines with fear; you view each day's events as just the latest potential investing calamity, and worry they might ignite a single-day sell-off severe enough to eviscerate years of diligent saving and personal sacrifice.

I can even understand why many of you would like to scamper to the supposed safety of the sidelines.

But don't do it.

The sidelines, you see, aren't as safe as you might think. Missing the good days can be worse than riding out the bad ones. And you run the very real risk of getting left behind.

Plus, there's a way to stay invested - one that allows you to capture life-changing profits.

I'm going to tell you about it today.

And I'm even going to show you the one stock that will let you put this "Fiscal Cliff" defense strategy to work...

In Growth We Trust

If you've been joining our talks over at the Strategic Tech Investor over the past six months or so, then you know that I'm a big believer in the profit power of high-tech growth stocks.

I want my readers to break free of the "zero-net-worth" syndrome that afflicts far too many of America's households.

My Five Tech Wealth Rules have already delivered some very big winners for many of you. And a number of the remaining recommendations have set the table for profits still to come.

Over the long haul, I firmly believe that high-quality, tech-focused growth stocks are the key to meaningful wealth.

But I've also said there's room for solid dividend plays ... especially the kind of higher-yielding tech companies that are continuing to growth their businesses.

Indeed, now's a very good time to be looking for just that kind of stock.

U.S. companies are fat with cash right now and have nearly $1.7 trillion on their corporate balance sheets.

And as I'm going to show you, tech firms top that list.

New Doings in Redmond

Just last week, in fact, Microsoft Corp. (Nasdaq: MSFT) said it was boosting its dividend by a whopping 15%.

The elevated dividend will cost the company an extra $1 billion a year. But with $56 billion in cash and equivalents on hand as of June 30, the Redmond, Wash.-based Microsoft made a move that will hearten existing shareholders and draw in new institutional players - without hampering the company's strategic flexibility one iota.

With shares of the world's dominant marketer of PC software currently trading at about $33.50, the new 23-cent payout brings Microsoft's dividend yield to a very decent 2.7%.

In fact, "very decent" may be an understatement ...

We've all heard pundits repeatedly talk about "historically low" interest rates.

But have you really stopped to look at what this actually means? Because it's pretty doggone dramatic.

As of last week, the yield on a one-year U.S. Treasury note was a mere 0.10%. Basically, for every $100 you lend to the government for the next year, they give you back a dime.

So if we use U.S. Treasury yields as our yardstick, Microsoft's dividend payout makes it seem like Fed Chief Ben Bernanke personally handed us the keys to a bank vault.

Assuming the stock merely breaks even over the next year, for every $100 you invest, you get back $2.70. That's roughly 24.5 times the return you get on short-term U.S. bonds.

And Microsoft is our kind of dividend stock - the kind that I referenced above. It's a company that offers a nice payout - and has a shot at some substantive upside growth. (As the investment pros that I deal with would say, it's a stock that offers a strong and potentially growing income stream... with the chance for capital appreciation.)

In the parlance of institutional players, there's suddenly "upside potential" in this leader-turned-laggard because there are some very clear "catalysts" at work.

In the last several months, Microsoft has unveiled a sweeping corporate restructuring. It has said that longtime CEO Steven A. Ballmer will retire, and the company announced a $7.2 billion deal involving the mobile-devices unit of Nokia Corporation (ADR) (NYSE: NOK).

I don't think the stock will just stand still for the next year. If it can even manage to match the previous one-year gain of 7.3%, your "total return" (capital appreciation plus the dividend payout) rises to 10%.

That kind of return might fit nicely in a portion of your portfolio - say, in your kid's college savings account ... where slow-and-steady is a great way to plan ahead and still sleep soundly at night.

A New King in Cupertino

We're seeing a very similar story over at Apple Inc. (Nasdaq: AAPL). Last year, new CEO Tim Cook decided to use some of the i-Device pioneer's $100 billion cash hoard to pay a special dividend to shareholders. That $2.65 payout worked out to a 1.8% yield.

Since then, the Cupertino-based Apple has announced plans to pay a regular dividend. The current payout of $3.05 a share was up 15% from its February predecessor - and represents about a 2.6% yield at current prices.

There's a new growth story taking root at Apple, as well, with record-setting sales of the new iPhone, a hot new mobile operating system, and a racy new chip that's lighting up global tech blogs.

Thanks, in part, to these developments, the onetime tech titans of Microsoft and Apple have reinvented themselves as growth-and-income plays.

But as new members of the dividend-payout club, it'll be quite some time before either of these two digital tech players can join a group of elite stocks known as Dividend Aristocrats.

And that brings us to the "Fiscal-Cliff defense" stock that I want to tell you about today.

A New Aristocrat

This group of income-producing aristocracy is composed of about 50 stocks that have a history of increasing their dividends for 25 straight years. The list spans roughly 10 business sectors and includes companies that still have room to grow.

As luck, one of my favorite medical technology stocks was added to the list two years ago.

I'm talking about the Minneapolis-based Medtronic Inc. (NYSE: MDT), a company that I've followed for many years.

Medtronic is the world's largest independent medical technology company. About half of the company's business is devoted to heart-problem treatments. The rest is apportioned among vascular diseases, diabetes, neurological conditions, surgical technologies, and spinal care.

Not long after its founding in 1949, Medtronic pioneered the use of electrical stimulation to treat irregular heartbeats. Today it's a global firm that does business in 140 countries.

And if we peruse some of the financial metrics that I use to analyze the stocks I recommend at Strategic Tech Investor, it's clear that this is a very profitable company.

Medtronic has a profit margin of 21% and a return on stockholders' equity (ROE) of 21%. It posted a 10% increase in profits last quarter.

But given the valuation levels that we're seeking in many U.S. stocks, Medtronic's shares aren't at all pricey. With a market cap of $53.8 billion, the stock trades at $53 a share and has a forward Price/Earnings (P/E) ratio of about 13.

This stock also underscores the strength of our thesis about how high-tech dividend plays can be used to offset worrisome headlines and other troubling market developments - the "potential investing calamities" that I referenced at the start of our talk today.

And this potential calamity is Obamacare.

The pundits and other so-called "experts" predicted that this stock and others like it were going to get pole-axed by Obamacare. The reason: The new healthcare plan hits medical-device makers with a 2.3% excise tax that analysts were saying would be difficult to pass on to customers.

Instead of getting pole-axed, Medtronic pole-vaulted: Even with the market's weak August, Medtronic is up 29% year to date - or 60% better than the 18% surge of the benchmark Standard & Poor's 500 Index.

Medtronic's ability to shrug off the downer developments of Obamacare was twofold in nature.

First, the company has been adding global muscle - thereby increasing the amount of its business that's not subject to Obamacare's most onerous elements.

And, second, Medtronic took a page out of its own business plan and shocked its dividend by 7.7%. That boosted the payout to 28 cents a share - and gave the shares a comforting 2% yield.

Expect this "growth-in-business/growth-in-dividends" strategy to continue.

Here's why.

Over the next several years, Medtronic plans to greatly increase sales in emerging markets. Last year, it bought China's Kanghui Holdings, a specialist in orthopedics, a burgeoning sector in the world's most populous nation. And recent reports show that the medical-device firm has been hiring more in China.

And now that Medtronic has joined the "Dividend Aristocrats" club, expect the company to keep boosting its dividend. There's a tacit marketing value in being part of that elite group. The "aristocrat" strategy is detailed in thousands of media reports each year, money managers base strategies and paid products around it, and dividend-focused institutional investors key in on them as income stocks of the highest quality.

In the meantime, Medtronic keeps running its basic businesses with a relentless commitment to growth through innovation.

Late Monday, for instance, at the Heart Failure Society of America's 17th Annual Scientific Meeting, Medtronic announced that brand-new clinical trial results showed that heart-failure patients treated with a company-enhanced defibrillator experienced a 46% reduced risk of atrial fibrillation - a common heartbeat rate or rhythm issue.

That's a great example of why I like this company. Remember, Medtronic pioneered electrical stimulation of the heart way back in the very early 1950s - developing the core competency on which the company's future was built.

Unlike so many companies, Medtronic hasn't forgotten the fundamental know-how that first made it a leader. And by continuing to invent, and then improve on those inventions, Medtronic built itself into a great company and then added other bits of know-how along the way.

This is just one of those tech-related stocks that will magnify the value of your stake over time - and that will also pay you handsomely while you wait for that payoff.

Source :http://moneymorning.com/2013/10/04/a-do...

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in