The Best Stocks for the Rest of 2011

By Jim Royal  June 22, 2011

Do you remember kicking yourself for not buying a stock when it was cheap, only to watch it move higher? We've all been there. But now's your chance to buy some quality companies at good valuations, and the five names I suggest below all pay dividends, too.

Investors are running for the hills
Just how did these bargains come about? Simple: Many investors are caught up in a blind panic. While that's exactly the best time to buy, remember that investors are running scared for a reason -- sometimes a good one. Below, I highlight three of the largest causes for concern.

The past six or seven weeks have been rough for us investors. The market seems to have sunk inexorably lower, hit by a triple whammy of slowing growth, a bickering Congress, and the end of Quantitative Easing 2.0 -- the Federal Reserve's controversial program of buying assets in order to stimulate the economy.

The end of QE 2.0: The market's move down coincided closely with the Fed's announcement that it wasn't planning a third round of quantitative easing. With investors expecting less liquidity coming into the market to support stock prices, they sold off stocks.

A divided Congress: The 2009 stimulus spending has worn off, leaving Congress fighting over a balanced budget rather than getting the economy back on track in the face of 9% unemployment, which shows no signs of serious improvement.

Slowing growth: With housing continuing to move lower, many consumers are still overwhelmed by debt, leaving them unable to ramp up their own spending. With Congress unwilling to open the purse for more stimulus spending (see Point 2), the market's not seeing the bump in aggregate demand that it wants.

Don't lose hope
Now, those are all reasonable concerns, and they all could continue for much longer. Who knows? But Foolish investors like us know that lower prices mean an opportunity to find bargain-priced stocks. You should be looking for stocks that can thrive in a difficult economy. It's even better if they can do well precisely because of the difficult macro picture, as many stocks below can.

So below, I present five stocks that I think will continue to do well, regardless of the concerns above. The stocks are reasonably priced, offer very attractive dividends, and even give you great downside protection as some investors grow concerned about the rest of 2011.

Source: Capital IQ, a division of Standard & Poor's. P/B = price/book, P/E = price/earnings, P/FFO = price/funds from operations.

Each company offers a solid dividend and the potential for even more in the years ahead.

more...

Calculate Performance