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Forbes' Brett Owens: Avoid AT&T, Buy JPMorgan and Boeing

Forbes' Brett Owens: Avoid AT&T, Buy JPMorgan and Boeing

By    |   Wednesday, 02 December 2015 08:15 AM

Despite recent volatility, most experts believe “there’s always a bull market” in some specific industry. Your challenge as a savvy investor is to find it.

Forbes contributor Brett Owens offers a simple formula: “Buy companies that pay — and preferably raise — their dividends. Even better if they also buy back their own shares.”

In addition, he reminds us that “buybacks cut the share count, boosting earnings per share — and share prices — while you get paid to hold the stock.”

His two top "buy" picks:

JPMorgan Chase & Co. (JPM)

He says the world’s third-biggest bank by market cap “ticks off every box on my list.”

“The shares yield a slightly above-average 2.6%, but JPM has hiked its payout by 76% over the last four years, or an average of 19% annually,” he said.

“If you bought the stock on, say, November 28, 2011, when it closed at $29.16, you’d be yielding a cool 6.0% on your initial investment today. What’s more, the bank pays out just 32% of its earnings as dividends, well below the 50% I like to see in dividend-payers, signaling more big hikes ahead,” he said.

JPM also plans a $6.4-billion repurchase program to be carried out between April 1, 2015, and June 30, 2016.

Boeing Co. (BA)

“The company’s earnings are also on a steady vertical climb, thanks to surging demand for airliners (68% of Boeing’s business in Q3). That will put some further lift under its payout, as well,” he wrote.

“On the buyback front, Boeing has taken more than 10% of its outstanding shares off the market since 2013. Year to date, it has spent $6 billion on buybacks — and it has another $6 billion remaining on its authorization.”

As an example of dividends gone wrong, he cites AT&T Inc. (T) as a perfect example.

“Some companies stretch their finances for dividends and buybacks and get themselves into trouble. You should avoid these stocks or short them outright,” he advised.

“Borrowing money to pay shareholders is generally bad. AT&T has actually paid out more in dividends per share than it earned per share in three of the last four quarters.”

With all the experts hitting the street with predictions and advice for the new year, US News warns that defense-related stocks may not be your best bet despite global uncertainty.

“Nervous investors should think twice before diving into so-called defensive stocks, especially those securities with high dividends. You might end up putting more risk into your portfolio than you realize,” US News’ Simon Constable warns.

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Forbes contributor Brett Owens offers a simple formula: “Buy companies that pay — and preferably raise — their dividends. Even better if they also buy back their own shares.”
Forbes, Dividend, Stocks, invest
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2015-15-02
Wednesday, 02 December 2015 08:15 AM
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