After that, the crystal ball clouds over. I’m not ruling out a happy resolution to Europe’s problems, but I’m not counting on it. The $64 trillion question, of course, is whether the slump will spread to other parts of the world, including the United States. Within a few months, we’ll know.
Clorox (NYSE:CLX)
During the spring and summer, takeover speculation swirled around Clorox (NYSE:CLX), the maker of bleach and Glad bags and Brita water-filtration systems. At one point, in fact, activist investor Carl Icahn proposed buying the company for $80 per share.
However, Icahn has since backed away, and the takeover groupies have exited the stock. Result: The share price has cooled down, presenting an opportunity for patient, long-term investors. Not only does CLX throw off a generous 3.7% dividend, but the company also has upped its payout 34 years in a row. The latest increase (in May 2011) amounted to a healthy, inflation-beating 9%.
What to do now: Buy CLX up to $66.70. From today’s level, I’m projecting a total return (dividends plus price gain) of 12% to 15% in the year ahead.
Waste Management (NYSE:WM)
Waste Management (NYSE:WM), the trash hauler, operates a steady, recession-resistant business — just the ticket in a sluggish economy. Moreover, judicious bolt-on acquisitions are helping the company to fatten its bottom line through economies of scale. The trash industry is highly fragmented, inviting consolidators like WM to take over smaller rivals and squeeze out overlapping costs. Topping off the investment case, the shares yield 4.4%. Dividends, piled higher each year since 2004, have grown 54% in the past five years alone.
What to do now: Buy WM up to $33.10. As with CLX, I’m projecting a total return (dividends plus price gain) of 12% to 15% in 2012.
Kellogg (NYSE:K)
Among consumer staples, my appetite is returning for Kellogg (NYSE:K). Tony the Tiger has tripped on his tail lately, running up some unwelcome expenses for product recalls and more defensible costs for supply-chain improvement and advertising/marketing.
However, lost in the negative buzz is that the company is almost certain to post record profits in 2011 — and 2012 should bring another all-time high. With the stock now trading about 16% below its average P/E for the past five years (based on forward earnings estimates), Kellogg has plenty of room for appreciation as the company’s investments in building the business start to pay off. The current yield is 3.5%.
What to do now: Buy K up to $50.
PepsiCo (NYSE:PEP)
Earlier in November, food-and-beverage company PepsiCo (NYSE:PEP) acquired privately held Grupo Mabel, the second-largest maker of cookies in Latin America, in a bid to unlock long-term growth opportunities in key emerging markets. PEP already boasts 19 brands with annual sales over $1 billion and is projected to grow faster than archrival Coca-Cola (NYSE:KO) through 2016. PEP’s forward P/E ratio, based on the next four quarters’ estimated earnings, is virtually the same as at the March 2009 major low.
And even if the economy worsens in 2012, you can count to PepsiCo to keep growing and keep “sharing the wealth” (dividends) with you: The company has sweetened dividends every year since 1973. The current yield is 3.3%.
What to do now: Buy PEP up to $64.
Government Properties Income Trust
Another dividend investment worth accumulating, even in a dicey market, is Government Properties Income Trust (NYSE:GOV). This rock-solid office REIT owns 64 office buildings in 26 states and the District of Columbia. Tenant occupancy stands at 96.1%. And what a tenant list it is: 74% of the trust’s rents are paid by the U.S. government, 14% by state governments and 6% by the United Nations.
The average remaining lease term is four years, allowing plenty of time to negotiate renewals (government tenants do typically renew). Debt is very low, too, at only 34% of book capitalization. Yet GOV yields a lush 8%.
What to do now: Buy GOV up to $23.
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