Safety or Growth? 3 Stocks That Offer Both

June 11, 2009

By Richard Band, Editor, Profitable Investing

Blue Chip Stock #1: ExxonMobil (XOM)

After bottoming in December, crude oil has steadily crept higher in recent weeks. I'm not predicting a rerun of last year's commodity boom anytime soon. Nonetheless, it seems likely that even a modest recovery in global business activity will eat into inventories of oil and natural gas, putting upward pressure on prices.

ExxonMobil (XOM), which has continued to drill aggressively during the industry downturn, will be set to cash in almost immediately.

As the financial titan of oil, sitting on $31 billion of cash (enough to pay off all the company's debt three times over), XOM is seldom a cheap stock. Since early March, though, investors have raced into dicier energy plays and left Exxon behind. It's time for quality to catch up.

Thrifty Tip: ExxonMobil features an outstanding low-cost direct-purchase plan that allows you to buy stock without going through a broker.

Minimum to set up an account: $250. (Perfect for gifts to a child or grandchild.) There's no set-up fee and no service charge on the buy side. For enrollment literature, call 800/252-1800 or visit www.computershare.com/exxonmobil.

Blue Chip Stock #2: Pepsico (PEP)

You know the old saying about what happens when the going gets tough. Pepsico (PEP) — which produces Lay's snack foods and Quaker Oats cereals as well as soft drinks, fruit juices and bottled water — is run by one tough customer, Indra Nooyi, who "got going" in early May with a 6% dividend hike. The company has now sweetened its payout 37 years in a row .

I love consistency of that sort, especially when so many other outfits (banks, for instance) have disappointed shareholders lately by slashing dividends. Still, I'm even more impressed with PEP's generous dividend yield — currently around 3.3%, a level unseen in any previous year since 1985.

When safety and rapid growth combine with a lofty absolute dividend yield, you've got a bargain!

Blue Chip Stock #3: Procter & Gamble (PG)

Arguably the world's greatest consumer-staples franchise, Procter & Gamble (PG) boasts an astonishing 23 brands with annual sales of $1 billion or more.

If you don't pour Tide into your washing machine or Swiffer your floors, you may be shaving with a Gillette razor, munching on Pringles or brushing your teeth with Crest. What's more, the company is building on its commanding lead by spending $5 million a day on research and development.

It's not just clever marketing that keeps this machine purring. And a money machine it is: In mid-April, PG boosted its dividend by a handsome 10%, the 53rd consecutive year in which Procter has lifted its payout.

Over the past 10 years alone, PG has tripled its dividend. Yet the stock is trading at its lowest P/E ratio, and its highest dividend yield, of any year since 1989.

Why rummage for junk when the finest merchandise comes this cheap? Current yield: 3.3%.