Most people look for one of two things from their
investments. They either want something that will provide
them with a
stable stream of income, or they want an investment that
will
grow in value over time. If you can discover a single
investment that gives you both income
andgrowth potential, you've pretty much found the
Holy Grail of investing.
Looking for income
Income investors are generally known as a fairly
conservative lot. They gravitate toward bonds and other
fixed-income investments that generally give them little or
no opportunity to see their principal grow. Although free of
default risk, ultra-safe investments like Treasury bonds and
FDIC-insured bank CDs can't protect your portfolio from the
ravages of inflationover time. In addition, most
income-producing investments generate a substantial tax
hit.
Moreover, even those income-seeking investors who are
willing to put their money in the stock market often tend to
stick with
solid, stable, low-growth companies. They don't have much
pizzazz, but they do provide a constant stream of income
without quite the same level of volatility you'll find in
more aggressive stocks. Companies like
GlaxoSmithKline (NYSE: GSK),
Waste Management , and
Duke Energy (NYSE: DUK) have actually seen
earnings and revenue
contractin recent years -- but they have good
histories of paying dividends over the long run.
Searching out growth
On the other hand, many growth investors are anything
butconservative. Often
taking big chancesby investing in companies early on,
before they've had an opportunity to prove themselves, growth
investors suffer a lot of big losses. But when they hit big
-- as they have on stocks like
Amazon.com (Nasdaq: AMZN) and
Google (Nasdaq: GOOG) -- the humungous gains
they earn more than make up for their prior losses.
The problem, though, is that growth stocks like Amazon and
Google don't provide any income to their investors. In order
to generate cash, you have to go out and sell shares.
Discount brokers have made it far easier to sell shares in a
cost-effective manner, so that's not as big a deal as it used
to be -- but it's still inconvenient to have to make a
transaction and create a taxable event just to get some
spending cash from your portfolio.
Have your cake and eat it, too
Is there a way for you to get the best of both worlds
-- solid income as well as potential growth? I went looking
for companies that offer both past and future earnings
growth, along with healthy current yields and a
history of raising dividends over time. Here are some of
the stocks I came up with:
Stock
Current Yield
5-Year Dividend Growth Rate
3-Year Past EPS Growth
5-Year Est. EPS Growth
Abbott Labs (NYSE: ABT)
3.1%
8%
37%
10.8%
Colgate-Palmolive (NYSE: CL)
2.3%
12%
17.4%
9.8%
Hasbro
2.9%
32%
16.7%
9% Continued... |