The Wall Street Journal has an article by Brett Arends about blue chip dividend stocks. Shop for Dividends in This Aging Bull Market

Wall Street has rallied a long way since the dark days last winter. But there are still plenty of blue chips offering big dividend yields.

Screen the market for yields over 3% that are well-backed by earnings and a surprising number of big household names come up -- Kraft Foods, Clorox, Sara Lee, Sysco, Johnson & Johnson, Merck, BP, NStar, Verizon Communications and AT&T.

Right now top dividend stocks have extra appeal. That's because they offer a tempting alternative to cash or bonds for those who need income.

"Why own bonds when you can own 'defensives'?" asks Bijal Shah, strategist at investment company Icap.

Such stocks "are cheap in absolute terms," Mr. Shah says. "The dividend yield of U.S. defensives now equals the yield on 10-year Treasurys.... And the dividends and earnings of defensives grow very steadily, unlike the earnings stream for the overall equity market."

Judy Saryan, a fund manager at Eaton Vance in Boston who specializes in dividend stocks, says the first thing she checks with a stock is the company's balance sheet: Does it have big, or unknown, potential liabilities that could blow up the company's finances? Paying attention to balance sheets steered her fund around many icebergs over the past few years.

The second thing to check is the cash-flow statement. Is the company earning enough to keep paying dividends? How much of a cushion is there if business turns down?

Her favorite sign: A company that's actually raising payouts. "If a company grows its dividend," she says, "that's the best signal the management and the board can give that they have confidence in the future."

What are her picks right now? Ms. Saryan likes many big drug companies, seeing strong cash flow and solid balance sheets at the likes of Merck, Abbott Laboratories, and overseas firms Sanofi-Aventis, Novartis and AstraZeneca.

Also on her list: Major consumer-product firms like Procter & Gamble, PepsiCo, Colgate-Palmolive and McDonald's.

Technology stocks have boomed this year, but a few big companies still offer reasonable yields, including Analog Devices and even Intel.

But some of the fattest yields are to be found in telecoms. "Verizon is very attractive," Ms. Saryan says. "It has the best quality network" and a 6%-plus yield. And there's possible upside if the network can offer customers an Apple iPhone next year, as some rumors suggest could happen.

She also likes overseas mobile giant Vodafone, and Spain's Telefonica, whose U.S.-listed shares have a 4.7% yield. Telefonica has emerging-markets growth because Latin America now accounts for about half of its sales.

Disclosure: The Div Guy owns shares of JNJ, T, PG, PEP and ABT at the time of this post.

Barron's has an interview with John Sullivan the director of research and investment strategist at Leerink Swann, a Boston-based investment bank that specializes in health care.

Q: So how should smart investors position themselves to profit in health-care stocks?

A: In 2009, some of the best-performing health-care stocks were small biotech companies. Strong clinical trial data on a number of drug candidates could help extend that rally. We see a great opportunity in big-cap names in 2010, especially select names in Big Pharma. At less than 10 times earnings and with a dividend yield of almost 4%, we like Pfizer (PFE) best. We also like Merck & Co. (MRK). Across all of health care, we can't find any other stocks that are more likely to meet earnings expectations over the next several quarters than Pfizer and Merck. Both companies closed significant acquisitions in late 2009, and have embarked on cost-cutting
initiatives that will help drive reliable and very predictable earnings growth for the next several quarters.

Q: Besides Big Pharma, where else should investors look?

A: Big biotech stocks dramatically underperformed last year. But large players like Gilead Sciences (GILD) and Genzyme (GENZ) could generate revenue growth in the area of 10% and increase their bottom lines at a rate in the teens or better. Genzyme had a tough 2009 due to manufacturing and regulatory problems. They should put those issues behind them in 2010.

Q: What about managed care?

A: Though the stocks rallied significantly in the second half of 2009, they remain attractive. The valuation gap between insurers and the broader health-care sector should close once health-care reform is put to bed. We expect U.S. employment to rise in the first quarter of 2010, which is good news for health insurers that cater to big employers, such as WellPoint (WLP) and Cigna (CI). These two companies are also less exposed to Medicare Advantage health plans -- a prime target of health-care reform.

Q: Cash-strapped hospitals kept a tight hold on supply inventories and capital spending last year. What's ahead for medical-device, hospital-supply and equipment makers?

A: Hospital suppliers remained reasonably strong last year, so we think there is continued opportunity among big names such as Baxter International (BAX) and Covidien (COV). Starting late last year, hospitals have grown more comfortable with their financial situation, so demand for capital equipment has shown signs of improvement. Large medical-device companies, meanwhile, are divided between cardiac and orthopedic companies. The arrival last year of a new CEO at Boston Scientific (BSX) has energized and focused the company and created an attractive opportunity for investors. Demand for orthopedic surgery will recover as the economy improves. A small firm called NuVasive (NUVA) is an interesting play with their differentiated products for spine repair.

Disclosure: The Div Guy owns shares of PFE at the time of this post.

I did a search to find a no load (no commision) index mutual fund with the lowest minimum requirement to open an account. The AARP Mutual Funds allow you to open an account with an investment of $25 if you sign up for a monthly contribution of $25 or you can set up an account with a single investment of $100. Additions to the account can be made at any time with a minimum of $25.

Now who can't afford to start an account with the AARP Funds?

You do not have to be an AARP Member to open an account and anyone who is a US Resident and has a Social Security number can invest in the funds. There are no minimum balance fees and a $10 annual maintenance fee charged by the custodian for IRA accounts.

Some other great things about the funds: they offer 4 index funds and a money market, they are managed (sub-advised) by State Street Global Advisors, they have low expenses capped at .50% and you can sign up right online.

I think even most young adults with or without debt issues should give this a try. Take a look at the AARP Aggressive Fund as it has a nice balanced portfolio including some international exposure.

Start an account today! No excuses.

The Div Guy is not associated with or compensated by AARP Funds. I did open two UGMA accounts with AARP Funds for my children.

Vanguard has a good article online that goes over what you should review in the new year. I review my stocks on a regular basis but I review my mutual fund allocation and IRA allocations at the end of each year. Here is the Vanguard info:

1. Review your financial plan. If your personal situation has changed during the last year—perhaps you got married or bought a new home—see if you're still on track to meet your financial and investment goals. And if you don't have a plan, now's a good time to learn the basics of financial planning.

2. Revisit your asset allocation. The turbulent markets of the past year may have changed your mix of stock, bond, or cash funds. Make sure your portfolio still aligns with your investment plan and rebalance if necessary.

3. Take inventory of your savings. Do you have an emergency savings account? Until last year, many people underestimated the importance of having money available to meet unexpected expenses. If you received a year-end raise or bonus, consider salting it away—you won't miss what you can't spend. You also may want to think about starting an automatic investment plan to ensure you're consistently saving and investing your money.

4. Make the most of your IRAs. Whether you're considering a Roth conversion to take advantage of rules changes in 2010 or maximizing your annual contribution, make sure you take advantage of every opportunity to save for retirement. And don't forget—you still have until the 2009 tax-filing deadline in April to make an IRA contribution for 2009.

5. Keep taxes down. You can't always avoid taxes on your investments, but you can make the bite less painful. Taxes can erode your long-term investment returns, so learn how to be a tax-savvy investor.

6.Control your debt. Don't let excessive debt control you. Creating a budget based on what you have—not on what you can borrow—and spending less can help you take control of debt.

7. Review your estate plan. Make sure the beneficiary designations on your investments and other assets are up to date. If you don't have an estate plan, consider working with an estate planning professional to help you deal with complex financial issues and minimize estate taxes.

Good luck on your 2010 financial plans!

2010 Dividend Income Plan
We plan on growing the yearly dividend income to $6,000 by the end of 2010 from our end of year 2009 balance of $5,468 by reinvesting dividends and investing additional money every month into our stock portfolio held at Zecco. In 2008 and 2009, we saw many dividend cuts that brought down our income considerably.(2009 year end plan $7,000 actual $5,468)

I will sell some stocks in our portfolio that have cut their dividends during 2010. I plan to be a little more conservative with my stock purchases for 2010. I will be focus on increasing stock purchases into our large blue chips stocks that will represent long term value. I will look to reduce some of my bank holding throughout 2010 as well.

Our long term goal is to have $30,000 in yearly dividend by retirement in 2024. Keep in mind, I don't consider this dividend stock portfolio diversified. I have most of our retirement assets in a diversified mutual fund portfolio with Vanguard.

The financial markets of 2009 turned scary in March but ended the year with a nice return. The S&P 500 had a total return (including dividends) of 26.46% for the year. There were also a number of dividend stocks that stopped or decreased their dividend payments throughout 2009.

A few years ago I started tracking our yearly progress towards reaching our retirement goals of having $2 million in retirement assets as well as reaching $40,000 in dividend stock income. I originally wanted to complete both these goals by the time I am 60 which is 14 years from now. But with the market decline in 2008, we will have to add a couple of years to our goal and our new plan is to retire at age 62 which is in 16 years. I have been using Bloomberg's Retirement Planner on their personal finance calculators site to come up with what we will need at retirement.

Retirement Assets
In order to reach our retirement goal, we will need an average investment return of 8.5% along with a 10% contribution to our retirement plans for the next 16 years. I have used $95,000 for our annual household income. I am using 3% for inflation, 2% for expected salary increases and 8% return on investment in retirement. To calculate the amount needed for the end of 2010, I start with our 2009 year end retirement balance of $522,034 which is the balance of our retirement accounts as well as our taxable stock accounts. We then add the 8.5% investment return which is $44,373 for a total of $566,407. Next I add our retirement contributions of $9,500 which is a 10% contribution for a grand total of $575,907 in retirement assets needed at the end of 2010.

As part of our retirement contributions, we will fully fund my wife's Roth IRA's and add some to mine for total IRA contributions of $6,000. My wife will make 6% contributions to her 401(k) and I will contribute 12% to my 403(b) plan.

2010 Retirement Plan Summary
$522,034 2009 year end retirement asset balance
$44,373 8.5% investment return
$9,500 2010 contributions to our retirement accounts
$575,907 2010 year end plan (2009 year end plan $404,432, actual $522,034)

2010 Net Worth Goal
Our 2010 Net Worth goal for the end of the year will be $836,907 which is the increase in retirement assets that includes and 8.5% investment return and $9,500 in contributions for 2010.

2010 Net Worth Goal
$575,907 2010 Year End Retirement Balance
$205,000 House
$12,000 Cash
$8,000 Cars
$3,000 Personal Property
$33,000 529 Accounts
$836,907 Total (2009 Net Worth Plan $683,637, actual $788,767)

Let's hope the 2010 plan goes as well as 2009. I will go over my 2010 Dividend Income Goal on Friday.

Here are the top 20 stocks in my Dividend Portfolio as of 12/31/09 ranked by size of holdings. I know some if these stocks no longer pay dividends but I have keep them for gains as the economy recovers. I will look to sell my stocks that are no longer paying dividends throughout 2010. I will go into more detail when I talk about my 2010 goals later this week.

1. Kinder Morgan Energy (KMP) USA
2. DCP Midstream Partners (DPM) USA
3. Barclays PLC (BCS) UK
4. HRPT Properties Trust (HRP) USA
5. Penn West Energy Trust (PWE) Canada
6. Johnson & Johnson (JNJ) USA
7. Procter & Gamble (PG) USA
8. General Electric Company (GE) USA
9. ONEOK, Inc. (OKE) USA
10. Banco Santander (STD) Spain
11. Cooper Tire & Rubber (CTB) USA
12. American Capital (ACAS) USA
13. Aircastle Limited (AYR) USA
14. Diana Shipping Inc. (DSX) Greece
15. GlaxoSmithKline (GSK) UK
16. Seagate Technology (STX) USA
17. Exxon Mobil Corporation (XOM) USA
18. Deutsche Bank (DB) Germany
19. Duke Energy Corporation (DUK) USA
20. Newell Rubbermaid (NWL) USA


Here are the top 20 holdings of the Tweedy, Browne Worldwide High Dividend Yield Value Fund as of the end of 11/31/09:

1. CNP Assurances France
2. Total SA (TOT) France
3. Novartis AG (NVS) Switzerland
4. Glaxosmithkline PLC (GSK) UK
5. Muenchener Rueckver Germany
6. Unilever NV (UN) Netherlands
7. Emerson Electric Co (EMR) USA
8. Pearson PLC (PSO) UK
9. Philip Morris Intl (PM) USA
10. Diageo PLC (DEO) UK
11. Embotelladoras Arca Mexico
12. Vodafone Group PLC (VOD) UK
13. ConocoPhillips (COP) USA
14. Coca Cola (KO) USA
15. Genuine Parts Co (GPC) USA
16. Johnson & Johnson (JNJ) USA
17. Eni Spa (E) Italy
18. 3M Co (MMM) USA
19. AT & T Inc (T) USA
20. Akzo Nobel (AKZOY) Netherlands

My Annualized Dividend Income as of the end of December increased to $5,468 from $5,448 for the month. This means my dividend stocks will pay $5,468 in dividends over the next 12 months.

I made a few dividend stock purchases over the past month from dividend distributions. It looks like the economy has bottomed out and we had no more dividend cuts the last few months of the year.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and dividend cuts, I had revised that goal to $5,500 and came up $32 short of the new goal. I will come up with new dividend and net worth goals for 2010 later this week.

Most of my stocks are held in my Zecco Trading account and the rest are DRIPs. The dividends from my stocks are reinvested but I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

I will post my Top 20 Stock Holdings on Wednesday.

As of the end of December our Net Worth increased to $788,767 from $770,689 for the month which is a 2.35% increase. The last day of trading for 2009 ended on a down day but it is great to see the market recover from the March lows. Our Net Worth at the end of 2008 was $629,685 so we are up quite a bit from a year ago but still below year end 2007 of $820,314. I am optimistic about the markets recovery in 2010 and hope to see companies add positions and unemployment figures start to decrease.

The breakout is as follows:
ASSETS
Retirement Accounts $395,250
Taxable Accounts $126,784
Cash $19,140
Home $205,000
Cars $8,500
Personal Property $3,000
Kids 529 Accounts $31,093

Here is the summary for this month:

Our Net Worth increased the past month due mostly to the raise in the stock market. We are still debt free since we paid off our credit card debt. We will continue to use our credit cards for rewards but payoff the balances each month. I received around $200 in dividends for the month and have used the cash from these dividends to make additional stock purchases of our dividend stocks but I have not been adding much extra money.

We will be building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. I continued funding our Roth IRA's each month.

I will post my Dividend Income Update on Tuesday.