Barron's Best Dividend Plays for 2009
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Date updated:02-14-2009

As fat dividends become scarce, here are 20 stocks with reasonably secure payouts of 4% or more. Think cigarettes, drugs and food.

symbol name last price % change open
  • +
  • MO
    Altria Group Inc
  • $18.98
  • -1.20%
  • $19.16

Two exceptionally high payout ratios belong to Altria, maker of Marlboro cigarettes, and Reynolds American, producer of Camel and Winston brands. Both companies aim to distribute 75% of their profits in dividends. Many investors find the cigarette business distasteful, and the industry domestically is in decline, hurt by falling consumption and higher taxes. Yet cigarettes' addictive nature gives tobacco companies pricing power, even in a recession.

People owning MO also tend to own: AAAAPLADBEBAMDVYGEHON

TheStreet.com Rating: No Rating What is this?

  • +
  • RAI
    Reynolds American
  • $50.88
  • +0.16%
  • $50.64

With the economy contracting, dividends are even more appealing to investors. Yet many are in jeopardy. Reynolds American offers the top yield among our picks.

People owning RAI also tend to own: AAALLAPCBUDCOPCVXDOW

TheStreet.com Rating: B What is this?

  • +
  • MRK
    Merck Co Inc
  • $36.46
  • +3.20%
  • $35.45

The drug sector is well represented with industry leaders Merck, Bristol-Myers, Lilly and Pfizer. Dividends at all four look secure, although future payout increases could be muted by modest annual profit growth. The new Pfizer dividend of 64 cents annually, for a 4.5% yield, looks safe at just 30% of projected 2009 earnings. The negative investor reaction to the Pfizer payout cut may make other drug makers wary of reducing dividends.

People owning MRK also tend to own: CCATDEFNMFREGEKO

TheStreet.com Rating: B- What is this?

  • +
  • LLY
    Lilly Eli Co
  • $36.59
  • +1.30%
  • $36.04

The drug sector is well represented with industry leaders Merck, Bristol-Myers, Lilly and Pfizer. Dividends at all four look secure, although future payout increases could be muted by modest annual profit growth. The new Pfizer dividend of 64 cents annually, for a 4.5% yield, looks safe at just 30% of projected 2009 earnings. The negative investor reaction to the Pfizer payout cut may make other drug makers wary of reducing dividends.

People owning LLY also tend to own: AIGALLBACCCATCBSCOP

TheStreet.com Rating: C What is this?

  • +
  • BMY
    Bristol-myers Squ
  • $24.46
  • +1.79%
  • $23.92

The drug sector is well represented with industry leaders Merck, Bristol-Myers, Lilly and Pfizer. Dividends at all four look secure, although future payout increases could be muted by modest annual profit growth. The new Pfizer dividend of 64 cents annually, for a 4.5% yield, looks safe at just 30% of projected 2009 earnings. The negative investor reaction to the Pfizer payout cut may make other drug makers wary of reducing dividends.

People owning BMY also tend to own: ACFBRK-ABRK-BCNQDJCODUKFRX

TheStreet.com Rating: B What is this?

  • +
  • HNZ
    Heinz H J Co
  • $42.23
  • +0.52%
  • $41.87

Food makers Heinz and Kraft make our list with their 4.8% and 4.6% dividends, respectively. Heinz is expected to boost its dividend in May -- by a small amount. It has an above-average stable of brands and could be a takeover target, as we argued last month (see "Anticipating the Return of the Ketchup Kid," Jan. 26.)

People owning HNZ also tend to own: DENNDRTEIASGJRCCMCDNOOFPBY

TheStreet.com Rating: B+ What is this?

  • +
  • KFT
    Kraft Foods Inc
  • $27.17
  • +0.74%
  • $27.59

Kraft has disappointed since its 2001 initial public offering, with the company unable to keep annual profit at more than $2 a share. This year doesn't promise to be any better. Kraft's stock, now 25, could be supported by its bond-like yield. Investors can buy the stock today for less than what Warren Buffett's Berkshire Hathaway paid for its stake of 132 million shares. Berkshire's average cost is $33 a share.

People owning KFT also tend to own: AAALLAPCBUDCOPCVXDOW

TheStreet.com Rating: B- What is this?

  • +
  • LO
    Lorillard
  • $79.48
  • +0.52%
  • $79.05

These 20 companies include Merck , Eli Lilly and Bristol-Myers in pharmaceuticals; Heinz and Kraft in food; Altria , Reynolds American and Lorillard in cigarettes, and Verizon Communications and AT&T in telecommunications.

People owning LO also tend to own: MIRPHPICOSATSTVWLPZEP

TheStreet.com Rating: B What is this?

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