Despite the massive rally of last week, I remain cautious on the market. I believe we are likely to have tough sledding over the next three to six months until the European debt crisis is resolved one way or another and/or we get confirmation that economic growth is accelerating.Given that, I am keeping a great deal of cash on hand to take advantage of any significant pullbacks. One area I have taken some large positions in is in large cap tech with my favorite holding being Apple. Another area I think there is good value in is large cap pharma. Specifically, I like firms that have growing earnings, reasonable valuations, and solid as well as rising dividends.Here are two stocks that meet that criteria and should be considered, especially by those investors looking for low volatility and solid dividend growth:Abbott Laboratories (ABT) - Abbott Laboratories engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. The Pharmaceutical Products segment offers adult and pediatric pharmaceuticals for rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, psoriasis, Crohn's disease, dyslipidemia, HIV infection, hypothyroidism, advanced prostate cancer, endometriosis and central precocious puberty, anemia, obesity, epilepsy and bipolar disorder, migraines, secondary hyperparathyroidism, gastroesophageal reflux disease, duodenal and gastric ulcers, and erosive esophagitis, as well as provides anesthesia products and anti-infectives.Overview – Abbott is selling at less than 12 times this year’s estimated EPS and under 11 times 2012’s consensus. The stock now is in the bottom of its five year valuation range based on P/B, P/S, P/E and P/CF. It has an AA rated balance sheet, sells for less than 11 times trailing operating cash flow, and has a generous dividend yield of 3.6%.Despite more than doubling earnings over the last five years and raising its dividend substantially, Abbott’s stock is 10% lower than it was back in early 2007. Over the last five years, ABT has grown revenues 10% on average annually. It has grown earnings an average of 13% and dividend payments by 10.5% annually over that time period. This low beta stock (.3) is projected to grow earnings by 10% a year over the next three years according to S&P. I would also look for this dividend growth to continue into the future, and thus I believe Abbott Labs is a good core holding for conservative long term investors.
Novartis AG (NVS) - Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide. Its Pharmaceuticals division offers prescription medicines in various therapeutic areas, including cardiovascular and metabolism; oncology; neuroscience and ophthalmics; respiratory; integrated hospital care; and other additional products. The company?s Vaccines and Diagnostics division provides preventive vaccines and diagnostic tools. This division sells influenza, meningococcal, pediatric, and traveler vaccines; and blood testing and molecular diagnostics to prevent the spread of infectious diseases.Overview – Novartis sells for 11 times this year’s projected earnings and approximately 10.5 times 2012’s consensus earnings. Earnings estimates for 2011 and 2012 have been raised over the last three months. Novartis is selling at about the same level it was late in 2006, despite almost doubling earnings and dividend payments in that time period.The stock now is in the bottom of its five year valuation range based on P/B, P/S, P/E and P/CF. Novartis has been one of the champions of raising its dividend over the past five years. It has raised its dividend payment over 15% annually over the past half decade and NVS now yields 3.3%. Novartis is a well diversified Pharma company with a large consumer eye product division (Alcon) and the second largest generic drugmaker (Sandoz) both of which help provide stability of earning and revenue growth and is the core reason its beta is under .6. This is another stock you can tuck away as you just watch the dividend payments grow over time.
Novartis AG (NVS) - Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide. Its Pharmaceuticals division offers prescription medicines in various therapeutic areas, including cardiovascular and metabolism; oncology; neuroscience and ophthalmics; respiratory; integrated hospital care; and other additional products. The company?s Vaccines and Diagnostics division provides preventive vaccines and diagnostic tools. This division sells influenza, meningococcal, pediatric, and traveler vaccines; and blood testing and molecular diagnostics to prevent the spread of infectious diseases.Overview – Novartis sells for 11 times this year’s projected earnings and approximately 10.5 times 2012’s consensus earnings. Earnings estimates for 2011 and 2012 have been raised over the last three months. Novartis is selling at about the same level it was late in 2006, despite almost doubling earnings and dividend payments in that time period.The stock now is in the bottom of its five year valuation range based on P/B, P/S, P/E and P/CF. Novartis has been one of the champions of raising its dividend over the past five years. It has raised its dividend payment over 15% annually over the past half decade and NVS now yields 3.3%. Novartis is a well diversified Pharma company with a large consumer eye product division (Alcon) and the second largest generic drugmaker (Sandoz) both of which help provide stability of earning and revenue growth and is the core reason its beta is under .6. This is another stock you can tuck away as you just watch the dividend payments grow over time.
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