Fed Chairman Ben Bernanke has made it clear that low interest rates are here to stay. Anyone with a savings account or a certificate of deposit at a bank feels the pain of a low interest rate environment. Thankfully, there are some quality equity alternatives that are paying juicy dividends that are very likely to continue each and every quarter. And with these equities at decent valuations, some capital appreciation may be in store as well. (For related reading, see Fundamental Analysis.)
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Safe Blue Chips
With almost 100% certainty, you can count on Microsoft's (Nasdaq:MSFT) dividend in 2012. At approximately $26 a share, the dividend yield is 3.1%. In fact, over the past several years, the company has increased its dividend to shareholders because of all the cash that builds up on the balance sheet. MSFT has over $50 billion in cash and short-term investments on the balance sheet and the company pays out around $5 billion in annual dividends. Not only is the dividend safe, but that much cash leaves the door open for dividend increases and helps protect the stock price.
AT&T (NYSE:T), another blue chip name, yields 6% today - about triple 10-year Treasuries. Between AT&T and Verizon (NYSE:VZ), they dominate the cellular phone market. For investors seeking income and safety, AT&T will give you 6% interest in 2012. Competition is stiff for the mobile market, but AT&T clearly has an entrenched position. (For additional reading, see how to Build A Dividend Portfolio That Grows With You.)
The market currently has some aggressive yields that look relatively safe in 2012. Terra Nitrogen (NYSE:TNH) is a fertilizer company structured as a master limited partnership. The agricultural sector remains healthy and looks to remain so as the world continues to demand more food. Growth in regions like China increase protein consumption which in turn has an inflated impact on grain demand. Fertilizer is the key ingredient in maximizing grain yields.
Currently THN yields 10.2%. Since November shares in TNH have fallen from around $185 to about $158 today. In the short run, shares prices can be volatile when corn and wheat prices are fluctuating. But the long-term picture remains robust meaning the 10.2% yield is money good for 2012. Of course, investors should be comfortable owning the stock because it is certainly possible for the shares to decline well over 10% if agricultural commodities continue to sell off.
Money in the Bank
Dividend paying stocks look very attractive in 2012. Quality yields exist that are better than money in the bank. With today's low interest rate environment set to exist for at least 2012, investors seeking income should consider these quality yields. (To learn more, read Dividend Yield For The Downturn.)
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At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.