The three have little in common except that they represent stocks that tend to hold up in both good times and bad. Here’s why the trio warrants a place in your portfolio.
The Home Depot, Inc. (NYSE:HD) is the world’s largest home improvement retailer. The company benefited from the slump in the housing market during the economic downturn when homeowners spent money on sprucing up their home’s interior and exterior as they found themselves spending more time around the house and less time eating out or on vacations. Currently, Home Depot is benefiting from the rebound in the economy and the improving housing market.
The company is a giant, sporting a market cap of 105.77 billion. Its P/E is a reasonable 23.56. Fourth quarter earnings were 68 cents a share, up from 50 cents in the same quarter a year ago. Guidance for the full year is EPS of a healthy $3.57.
Home Depot’s board just authorized a $17 billion share repurchase program and declared a 34% increase in its quarterly dividend to 39 cents per share.
Business is expected to remain brisk as clean-up from Superstorm Sandy continues and housing rebounds.
International Business Machines Corp. (IBM), a multinational technology and consulting company, manufactures and markets a bevy of tech components from hardware to software. It also offers infrastructure, hosting and consulting services. The firm is an unrivaled pioneer in its industry.
The Armonk, N.Y. based company has held the record for the company generating the most patents for 20 years. This innovative tech behemoth has moved swiftly and successfully into cloud computing. Cloud, the next big thing that is already here, streamlines how software, business processes and services are accessed. This explosive technology helps businesses scale operations and optimize investments. More and more companies are finding cloud services at lower costs, making for more efficient business models and growing profits.
A favorite of Berkshire Hathaway Inc. (NYSE:BRK.B)’s Chairman Warren Buffett since 2011, the investment guru continues to add to his position. International Business Machines Corp. (IBM) now accounts for 18.6% of Buffett’s portfolio.
IBM has a modest P/E of 14.45, yields 1.63% and has a strong history of repurchasing shares.
Buffett said on CNBC that American businesses are presently a great place to put your money. More specifically, American businesses that “are earning good money, that have high returns on equity, have high returns on incremental capital, are buying their stocks at a rapid rate so that your ownership in the business increases significantly.” In that statement, he was describing International Business Machines Corp. (IBM).
McDonald’s Corporation (NYSE:MCD) has morphed from a burgers and fries joint into a multifaceted global casual dining spot. It is one of the most popular and recognized brands in the world. That has given it an inherent advantage over competitors. Also giving it a distinct edge is its hefty number of stores in heavily trafficked areas, unparalleled ad budget and new product introductions like Fish McBites and regional friendly breakfast items, which continue to woo and wow customers.
The Chicago based company is quick to adjust to shifts in the economy, changing palates and health conscious consumers and advocates.
Shares trade at a moderate P/E of 18 and carry a dividend yield of an appetizing 3.18%.
The article Three Dow Dynamos That Helped the Benchmark Reach a Record High originally appeared on Fool.com and is written by Diane Alter.
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