Daily Gains Letter

Top Stocks to Watch for Steady Dividends and Capital Gains

By for Daily Gains Letter |

Top StocksThe stock market may be blooming again with the major key stock indices rallying back above their 50-day moving average (MA), but there is still ample downside vulnerability.

We have the mess in the eurozone with Greece threatening to leave the euro and not honor its massive debt obligations. There’s also the China risk. Then there are the oil prices. Oil rallied to $53.00 last week, prior to retrenching and then rallying again. It’s going to be nerve-racking.

The problem investors continue to face is the lack of alternatives to the stock market. The 10-year bond yields 1.82%, which is not great unless you have tons of cash. Of course, you could buy distressed high-yielding Greek or Russian debt, but why would you, given the default risk?

So that leaves us with stocks.

Stocks to Watch While Bonds and Global Economy Stagnate

For those of you looking for and requiring dividends, it’s not easy at this time. There are the big banks and higher-risk regional banks to consider. For this reason, I would be sticking with the more stable dividend-paying stocks that not only pay dividends, but also offer the opportunity for capital gains.

The most obvious target for dividends is the blue-chip area. These are great companies with proven long-term sustainability for investors seeking dividends and growth. We are talking about world-class multinational companies, such as The Boeing Company (NYSE/BA), General Electric Company (NYSE/GE), Johnson & Johnson (NYSE/JNJ), The Coca-Cola Company (NYSE/KO), McDonalds Corporation (NYSE/MCD), The Procter & Gamble Company (NYSE/PG), and Wal-Mart Stores Inc. (NYSE/WMT). For the most part, you cannot go wrong with blue-chip dividend stocks.

Aggressive Small-Caps for Dividend Income and Capital Gains Potential

Now, if you want to add some spice to your portfolio and assume more risk, I would suggest looking at some of the smaller dividend-paying stocks. With the added risk, you have more upside potential, but you also have the downside risk of more losses during a market decline.

A good example of a small-cap dividend-paying stock that looks intriguing is investment management company Och-Ziff Capital Management Group LLC (NYSE/OZM), which runs about $48.0 billion for pension funds and other institutional money. The stock pays a nice dividend yield of 7.2%.

Och-Ziff Capital Chart

Chart courtesy of www.StockCharts.com

Och-Ziff also offers some diversity with 15% of its assets in Europe and 12% in Asia and other regions. The North American market accounts for 70% of its capital.

The company has beaten consensus earnings-per-share (EPS) estimates in three of the last four quarters. Revenues are estimated to surge 40% to $1.56 billion this year, with earnings of $1.48 per diluted share according to Thomson Financial.

Keeping with the asset management area, another example of the kind of company investors may want to take a look at is Fortress Investment Group LLC (NYSE/FIG), which manages about $66.0 billion in assets for more than 1,600 institutions and private investors. The stock pays out dividends of $0.32 annually for a yield of 4.5%. Revenue growth is estimated at 17.4% this year with earnings of $0.83 per diluted share.

Fortress Investment Chart

Chart courtesy of www.StockCharts.com

If you are looking for a play on the economy and housing market, take a look at Knoll, Inc. (NYSE/KNL)—a maker of workplace and residential furnishings. The stock currently pays out a 2.3% dividend yield.

And for those seeking an adrenaline rush, take a look at a company like Meridian Bioscience, Inc. (NASDAQ/VIVO), a maker of products for medical conditions, including gastrointestinal, viral, and respiratory infections. Meridian operates in more than 60 countries and pays a 4.6% dividend yield.

Please note that none of the above-mentioned companies should be construed as buy recommendations; rather, these companies are meant to be used as examples of the kinds of stocks investors should watch in 2015 for steady dividends and capital gains.

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