While the past decade has been one of value destruction in the stock market according to the S&P 500, the actual value of many large cap quality issues has significantly increased. Unfortunately, the stock market has not accounted for this value creation over the past decade if you held on to those names for the entire 10 year stretch.

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Back in 2000, Johnson and Johnson (NYSE:JNJ) did $29 billion in sales and $4.8 billion in profit. At the end of 2009, sales and profits were $62 billion and $13 billion, respectively. Yet over that time the stock barely budged. Clearly, one can argue that JNJ is a much more valuable company today than it was 10 years ago.

Valuation First

Dividends alone today are not the reason to look closely at quality issues. As an asset class, these names appear the most attractively valued even after last year's rally. As the market rallied, unprofitable highly levered companies surged in value, while cash generating industry leading businesses delivered average returns at best. As a result, many of the best capitalized and diversified businesses offer an attractive pool of investment candidates.

Kraft Foods (NYSE:KFT) is one excellent possibility. Having just completed the acquisition of Cadbury, Kraft has now enhanced its growth by increasing its exposure to the emerging markets. The shares trade at 11 times earnings and yield 4%. Compare that with General Mills (NYSE:GIS) which trades at 15 times earnings and yields 3.3% and doesn't have the increased emerging market exposure that Kraft now has.

A Solid History

Altria Group (NYSE:MO) currently yields over 6% and trades for under 14 times earnings. The company has consistently remained one of the strongest dividend paying stocks in market for decades. This may be due to the fact that paying an attractive dividend attracts investors to a company that sells cigarettes. But the fact remains that its business remains one of the most resilient despite the state of the economy.

Over the past decade, Altria shares are up over 270% and that's before the dividend. Even if this share price were to remain flat for a decade, the dividend alone delivers a near 7% annual return. Considering many sage investors like Jeremy Grantham at GMO are calling for 7-8% annual returns from equities, that's not a bad deal at all. (To learn more, see All Returns Are Not Created Equal.)

The Bottom Line

Whether its foods, cigarettes or Tylenol, today's large cap dividend plays offer a very compelling investment landscape in an economy characterized by little to no growth.

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Tickers in this Article: KFT, GIS, JNJ, MO

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