Is this stock market driving you up the
wall? I’m going to describe what I call my “buy and forget portfolio.”
It includes four stocks and one fund that, in theory at least, you
won’t have to worry about.
Yes, if they market dives, they’ll drop
with it. But, they will come back. In the long-term, their outlooks
won’t be affected much by what happens in Greece, Italy, or even in
Washington, DC. Plus, they all pay solid dividends. So you get paid,
no matter what happens.
Vanguard Total Bond Index
(BND)
Vanguard, an exchange-traded-fund (ETF), tracks an index that
represents a large variety of medium-term government, government
sponsored, and corporate bonds. The fund pays monthly dividends, which
currently equate to a 3.2% dividend yield. Historically, it has very
low volatility, which means its share price doesn't move around much.
In fact, I consider the Vanguard Total Bond Index to be a potential
alternative to money market funds and CDs, which you probably know,
are paying 1% or less these days. However, unlike most bank accounts;
your principal is not insured by the U.S. government. Spikes in
interest rates or inflation typically sink bond prices. Such events
are unlikely for at least the next year or so.
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McDonald’s (MCD)
McDonald’s needs no introduction. But you may not realize that, while
only growing sales in the U.S. around 4% annually, McDonald’s is
rapidly expanding overseas. In fact, for the first six months of this
year, total sales rose 12% compared to the same period last year.
Because McDonald’s sells relatively low-priced products, its expansion
rate won’t be hurt much by an economic slowdown. Last month,
McDonald’s raised its dividend by 15% bringing its dividend yield up
to 3.2%.
Altria
Group (MO)
Cigarette maker Altria operates the U.S. segment of what used to be
known as Phillip Morris. Brands include Marlboro, Parliament and
Virginia Slims. Besides for cigarettes, Altria also makes cigars and
smokeless tobacco products. Altria pays dividends equating to a 6.1%
yield. Counting dividends and share price appreciation, you can expect
around 10% to 12% total returns, on average, annually.
HJ
Heinz (HNZ)
Besides for ketchup, Heinz makes condiments, sauces, frozen foods,
soups, beans and pasta meals, infant food, and many other packaged
food products. Brands include Lea & Perrins, Ore-Ida, Weight Watchers,
Boston Market and T.G.I.
Friday’s. Similar to McDonald’s, Heinz is growing rapidly
overseas, especially in emerging markets, and its growth is unlikely
to be affected much by economic ups and downs. Global sales growth is
running around 8% annually. Heinz is paying dividends equating to a
3.8% yield and typically raises its payout around seven to 9%
annually.
Pepco
Holdings (POM)
Pepco is an electric and natural gas utility serving customers in
Delaware, Maryland, New Jersey and Washington, DC. The thing that many
investors hate about utilities is that they are so boring. The great
thing about utilities in this market is that they are so boring.
Sometimes they have a bad quarter because the summer wasn’t hot
enough, or the winter wasn’t cold enough. Sales might be off in a
recession. If, the stock market plunges, utility stocks go down too.
But assuming that you stick with
well-managed utilities; long-term none of that matters much.
Utilities’ don’t have to worry about competition or new technologies
making their products obsolete. Dividend cuts are a rarity. Pepco‘s
payouts equate to a 5.7% dividend yield. Counting share price
appreciation, expect around eight to 9% average annual return.
These are my best ideas for stocks and
funds that you can buy and forget. I suggest that if you like the
concept; buy all five. Don’t try to cherry pick the list. Some will do
better than others, but you can’t know which is which in advance.
10/11/11