Saturday, October 11, 2008

Dividend Stock Purchases: PG, JNJ and PEP

The past few weeks have been a very difficult time for most stock investors. The stock markets are down about 40% from recent highs of a year ago. I still like the stocks I hold and I have made some additional purchases this week of my favorite dividend stocks. I don't know when the markets will turn around or if there will be a recession but I know some companies will do well in any environment.

I purchased shares of some of the strongest and financially secure stocks that I feel should do well in a difficult market. The three stocks I have purchased are Procter & Gamble (PG), Johnson & Johnson (JNJ) and Pepsi (PEP). I feel these companies will continue to do well in a difficult economy. I talked to some business leaders today about their employees taking steps to cut personal excess spending and tightening budgets. They told me about employees changing their vacations plans and decreasing discretionary spending. They also said their companies were implementing hiring frees and cutting capital spending project for the foreseeable future.

Many people will stop making big ticket purchases in a economic downturn but they will still purchase consumer goods, food items and medicinal supplies. That is why I feel PG, JNJ and PEP will be great dividend stock picks for our current environment. I also just read a write up on JNJ by by Gene Marcial of BusinessWeek. Here are some highlights:

Marcial: J&J, a Healthy Defensive Play

When things get tough in the stock market, it's time to play defense—and offense. That's the strategy of savvy professional investors as the major U.S. equity indexes spiral downward.

But in the worst of times, the markets create value for those willing to pluck out the "angels" that have fallen hard. Of course, investors should always strive to pack their portfolios with defensive stocks that are of star quality even in good times—companies endowed with strong balance sheets, robust cash flows, and rising sales and profitability, with little or no debt and handsome dividends to boot.

When the market crashes, as it is bound to do—the current environment being a perfect example—investors should be prepared to snap up quality stocks like those at a huge discount.

Johnson & Johnson (JNJ), one of the world's largest and most diversified health-care companies, is one such stalwart—both a defensive and offensive play. A major force in pharmaceuticals, medical devices, and consumer products, J&J draws its strength and sustaining power from diversification. Many of its consumer products are widely known brands, including nonprescription drugs like Tylenol and Imodium A-D antidiarrheal medication, Johnson's baby line of products, and its Band-Aid line.

"J&J's diversified sales in these three sectors, along with its decentralized business model, has served it well in the past and should continue to do so in the years ahead," says Herman Saftlas, health-care analyst at Standard & Poor's, who rates the stock a strong buy.

Disclosure: The Div Guy owns shares of PG, JNJ and PEP at the time of this post.

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  1. Good buys!
    I own KO vs. PEP, but PG & JNJ are some of my highest regarded positions of all my equities

  2. Brad,

    I think KO and PEP are both great stocks. I like the additional diversification of products at PEP. I think JNJ and PG are great buys at this time.

  3. I like PEP better than KO as well for their diversification in product lines. PEP and PG are probably the two best, all around consumer products firms on the planet. These stocks are not cheap right now, but were still sold off unfairly.

  4. Just bought some more shares of PEP today after the bad eaenings report.


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