Yield Hungry
I'm hungry. I've been overweight in cash for the majority of the last ten years. My active trading has helped me maintain respectable returns but I want to start putting more money to work.  After all, I want to live off my dividends and income.  I've been running value screens on assets all over the world.  With a few exceptions, the same assets class keeps coming up cheap: U.S. Mega Caps.  I want out of long term bonds. I sold my utilities, I sold my REITS, I'm out of emerging markets except for* Usiminas (USNZY) and Unibanco (UBB) in Brazil and Korean Electric Power (KEP). I'm out of global bonds.  Everywhere I look I keep coming back to those US big caps.

What to Buy?

REIT yields are around 4% – against a historical average closer to 7 or 8%, long bond yields are 4.5%, and I'm looking at a basket of large cap U.S. stocks that yield around 4%.  When I look at inflation protection, equities are a safe bet in the long run.  In the short run you can get clobbered if the Fed or the market really ramp up long term rates to fight inflation. But in the long run, companies that can keep paying dividends are the best way to have inflation-protected income.

Feed the Hungry With a List

I put together a list of companies that I think have good management and are committed to paying what I think is a relatively safe dividend. These companies also have a history of increasing dividends, so even if the yields are not 4% I think they'll be there soon.  The stocks are listed in order of descending dividend yield.  I had to buy a small position in BAC today so that I could say I own every stock on this list:

Pfizer (PFE – $25.45) Yield: 4.61% (Pharmaceuticals)

Bank of America (BAC – $50.81) Yield: 4.4% (Financial)

Citigroup (C – $50.59) Yield: 4.27%  (Financial)

General Electric (GE – $34.52) Yield: 3.23% (Conglomerate)

Kraft Foods (KFT – 31.42) Yield: 3.10% (Food)

Chevron (CVX – $69.31) Yield 3.07% (Integrated Oil)

ConAgra Foods (CAG – $24.66) Yield: 2.93% (Food)

Coca-Cola (KO – $47.91) Yield 2.9% (Food)

3M (MMM – $74.04) Yield: 2.6% (Conglomerate)

Conoco-Phillips (COP –  $68.27) Yield: 2.5% (Integrated Oil)

Johnson and Johnson (JNJ – 61.59) Yield 2.43% (Pharmaceuticals ? Healthcare)

Chubb (CB – $49.80) Yield: 2.36% (Insurance)

Anglo American ADR (AAUK – $23.37) Yield 2.31% (Mining Gold and Diamonds)

Alcoa (AA – $32.39) Yield 2.1%

Microsoft (MSFT – $27.67) Yield: 1.44% (Software)

My Values Won't Let Me Buy

A few stocks belong on this list for financial reasons but I could not include them because either: 

1. I Disagree with their behavior of late and can find alternatives in the same sector that are just as good or better (i.e. – Exxon (XOM) promoting anti science lately?? and I can find better valuations.)

2. They are a tobacco company and I won't be able to sleep at night knowing that I benefit if more teenagers start smoking. (i.e. – Altria (MO) cigarettes.  Actually, a well managed company but I don't want to hope more kids smoke.)

Do You Feel Differently?

You may feel you cannot own some of the companies I am willing to own. Perhaps you won't own a company in the gold and diamond mining business that exploits Africa like AAUK.  If you feel that way, feel free to try to talk me out of it in the comments section of this article.  After all, discovering where our values match with investments is part of our mission at The Panelist.

*How can a Tax Liability Disincentive a Sale?

I would have sold Unibanco and Usiminas a while back but my capital gain is just large enough (80-94% of stock price) that my tax liability is less than how much I think the stocks will go down.  So I'll hold and continue to collect my fat dividend.

Disclosures and Confessions: I own every stock named in the list. Because I feel it's important to walk my talk.  On Wednesday I bought both AIG and BAC.  If BAC and AIG along with financials after this week's brokerage earnings reports, I'm likely to buy more.

Disclaimer: Nothing in this trade log is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security. Options may be for me but they are are not for everyone.  Futures are highly speculative.  You can lose more than your initial investment in futures.