Apple trades at a 10.4 earnings multiple, which is reasonable in an environment of 20% to 25% projected growth in both tablets and smartphone devices. The company also compensates investors with a 2.8% dividend yield, and is also reducing share float with a $60 billion share-buyback program.
Investors can also find a safe haven in everyday-low price retailing giant Wal-Mart Stores, Inc. (NYSE:WMT). The company is experiencing currency headwinds, which hurt the bottom line earnings growth in its most recent quarter. However, the company’s retail strategy is continuing to improve within the United States, as comp sales were up by 1.3% in the domestic division. The company was able to grow earnings throughout the great recession, making it a solid investment in both good and bad times.
The company pays out a 2.5% dividend yield and is projected to grow earnings by around 9.5% on average over the next five years. The mix of yield and growth is likely to be sustained given the success of the company’s retail strategy over the past 50 years.
The Procter & Gamble Company (NYSE:PG) is another defensive player that investors cannot ignore. The company continues to return cash by buying back shares and at the same time growing sales of its most prominent brands in emerging markets. The company is a non-cyclical stock because laundry detergent, tissue paper, and mouthwash will always be in demand regardless of seasonality or economic recession.
Going forward the company is projected to grow earnings by around 7.2% on average over the next five years, and has a dividend yield of 3.1%. The company’s mix of yield and growth are compelling for those who want to beat the bond market with both equity appreciation and dividends.
Investors should stay the course in equities. Rumors of a potential economic recession should be disregarded as an economic recession isn’t likely to happen within the next two years. Calls for declining stocks because of an end of inflationary policy should also be ignored as the economy can grow during periods of both declining and rising long-term interest rates.
Investors coming from bonds into equities would do best by owning quality stocks that pay out a dividend.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Apple Inc. (NASDAQ:AAPL) and The Procter & Gamble Company (NYSE:PG). The Motley Fool owns shares of Apple. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Ignore Pimco and Buy These 3 Companies originally appeared on Fool.com and is written by Alexander Cho.
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