The Procter & Gamble Company (PG), Altria Group Inc (MO) & Three Stocks for an Overheated Market

The stock market has been on an absolute tear this year, and the bullishness surrounding the market continues to build.  However, Bernanke’s comments on Wednesday hit the market hard.  If the jitters surrounding higher interest rates continue to spook the markets, a pullback could be coming.  As such, we look at three stocks that make good investments even if we head into a pullback in the markets.

Evaluation Criteria

Dividend Yield

One of the major components of any sound buy-and-hold stock portfolio should be dividend yield.  A strong dividend suggests financial stability and sufficient cash flow to maintain all business operations.  Dividend yield will also ensure that the investor continues to earn income, even if stocks pull back a bit.

Ten-Year Annualized Beta

Beta is a measure of the correlation between an individual stock’s price movement and the movement of the overall stock index.  It essentially represents the impact of the overall volatility in the market will have on the individual stock.  A beta of less than 1 means a stock will move in the direction of the market, but not to the same extent as the market.  A beta above 1 implies that the stock’s movement will be to a greater magnitude than that of them the market.

Stock Parameters

The stocks below all sport a dividend above 3%, a yield greater than the current 30 year treasury and well above the return on a 10 year treasury.  They also posses a ten-year annualized beta less that .5.  This measure should ensure that if we do see a pullback, sell-in-May event, or other market slowdown, these stocks should hold up better than the broader market index.

The Procter & Gamble Company (NYSE:PG)

Procter & Gamble engages in the sale and manufacturing of a range of branded consumer packaged goods(CPG).  The company is a giant in the CPG market and owns such iconic brands as Gillette, Vicks, Crest, Downy, and Pampers.  The company sells its products in approximately 180 countries.

The Procter & Gamble Company (NYSE:PG) has a dividend yield of 3.01% and a ten-year annualized beta of .48.  The company also has a history of rewarding shareholders with a five-year average dividend growth rate of 8.50%.

Credit: Procter & Gamble Company (NYSE:PG)

Altria Group Inc (NYSE:MO)

Altria Group engages in the manufacture and sale of cigarettes, smokeless products and wine internationally. Altria manufactures well known brands such as Marlboro, Skoal, and Ste. Michelle wine.

Altria Group Inc (NYSE:MO) has a strong dividend yield of 4.7%, a 7.32% increase from a year ago.  The ten-year annualized beta is .46.  The company also has a history of strong operating cash flows to support the dividend and currently has $2.9 billion of cash on the books.