Stock of the Week
Barrons ran an article last week indicating a number of blue chips including ExxonMobil, Microsoft, Intel, Verizon, AT&T, Altria, Philip Morris, Merck, Chevron, IBM, HP, Oracle, Walmart, Johnson & Johnson, GE, and Cisco System are trading for 10 or 11 times 2011 earnings. ExxonMobil is actually trading below the Great Recession lows from last year and sports a dividend yield of 3.1% which is more than a 10 year Treasury bond. That's cheap. Chevron's and Merck's dividend yields are above 4%. Intel's is 3.3%, and Microsoft and IBM are sporting 2% yields. The best dividend yields go to Verizon and AT&T at 7%. Altria is at 6.9% and Philip Morris is at 5%.
The financials are still the riskest of the blue chips due to loan losses and concerns regarding the financial regulation. However, over the next several years as loan losses decline the banking earnings will jump dramatically allowing the banks to pay dividends once again. So on the surface the banks don't look cheap, but looking forward to more normalized earnings the banks have a lot of room to the upside.