Two Low-Risk Dividend Stocks To Hide Out In

Dividend Growth Stock #1 - Merck & Co., Inc. (MRK)

In 2009, Merck & Co., Inc. (NYSE: MRK) absorbed rival Schering-Plough, opening the way for the combined enterprise to cut costs and concentrate its research efforts on the most promising medicines in the pipeline.

Earnings per share touched a new all-time high in 2009, and will likely progress another 20% or so over the next two years as the merger savings kick in. Surprisingly, perhaps, MRK never slashed its dividend during the Vioxx crisis and may, at last, be poised to sweeten the payout some time within the next 12 months. MRK's current yield is 4.2%.

By 2013, based on the company's cash-generating potential, I project a total return of 55%-75% even if the overall market goes nowhere. Buy MRK at $40 or less.

Dividend Growth Stock #2 - Exelon Corporation (EXC)

Exelon Corporation (NYSE: EXC), the nation's largest owner-operator of nuclear power plants, stands to benefit from increasingly stringent limits on carbon emissions in the years ahead.

At the moment, electricity demand is down, depressing wholesale power prices. (EXC earns about 70% of its profits from sales to other utilities.) Thus, I expect the company to report a modest dip in 2010 earnings. However, a rebound is likely in 2011 -- and the stock is very cheap at less than 12x this year's trough earnings. As recently as mid-2008, EXC sold for 22x net, so you're getting a 45% discount off the peak valuation.

EXC's current yield is 4.8% -- and safe. Even at this year's low run rate, profits cover the dividend by a comfortable 1.8x. Buy EXC at $46 or less.