General Electric Company (GE), Apple Inc. (AAPL): 4 Dividend Stocks Built to Last

Some investors think that a PE around 12 isn’t too cheap for a company like Cisco but I disagree. Cisco is like Apple in a way, the market loves to discuss what it “isn’t anymore.” It should just be appreciated for what it is; it’s a wonderful producer of cash.

There’s a reason so many tech stocks pay high dividends with low pay-outs, they have remarkably consistent cash streams. Cisco easily meets our criteria with a pay-out ratio under 40% and a dividend yield of 2.8%. With a forward PE of just 11, growing earnings, and an industry leading CEO at the helm in John Chambers, I think a case can still be made for Cisco.

Deere season

I’m a huge fan of Deere & Company (NYSE:DE). Not only does it fit our criteria nicely, with a pay-out ratio under 25% and a dividend yield of 2.4%, the company has tremendous growth potential.

Deere is behind a major long-term growth trend in agriculture. As the population grows to 9 billion people by 2035–from a record 7 billion today–more people will need to be fed. Further, rough growing conditions due to overused land, and a coming refresh cycle in agriculture equipment, should drive growth going forward.

Yet, despite all that good news, the stock has been held in check with a PE just around 10. This is largely due to near-term weakness in crop prices and the broader commodity market; still, Deere has produced record results.

A very small portion of those earnings are being paid out in dividends right now. Deere’s dividends should continue to increase with earnings.

Why do dividend stocks with low pay-outs crush the market?

What’s the best part about these low pay-out stocks? How about not having to watch CNBC during every free moment of your life?

You won’t have to follow the constant rumors about when the Fed is going to stop its bond buying program. Dividend investors are worried about the Fed’s actions potentially raising bond rates. If that does happen the dividend bull could be toast; but not for low pay-out stocks.

The reason is simple. If the pay-out ratio is low, as long as earnings keep growing, there will be more cash available to increase dividend yields. It won’t matter what happens with the Fed or bond market.

Adem Tahiri owns shares of Apple and Deere & (NYSE:DE) Company. The Motley Fool recommends Apple and Cisco Systems (NASDAQ:CSCO). The Motley Fool owns shares of Apple and General Electric (NYSE:GE) Company.

The article 4 Dividend Stocks Built to Last originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.