Annaly Capital Management, Inc. (NLY), The Coca-Cola Company (KO): Consider Dividends While Worrying About a Correction

The last earnings report contained some small problems, but they were not red flags. Some of the ships were not used as much and with increasing interest expense due to expansion, which hurt EPS a bit. The company had EPS of $0.21 for the quarter ending March 2013, versus $0.30 in 2012. It is still a solid result for a company that is yielding 5%.

For a classic taste you can go with The Coca-Cola Company (NYSE:KO), because it has been a solid return for decades now. The company aims to maintain its dividend and make buybacks. The yield of 2.78% seems low, but Coca-Cola does move. In the last three years the stock has gone up over 50%, which is not too bad for the lower risk that it offers.

The stock is near its all-time high. On the Yahoo! Finance max chart you can see that in 1998 the stock hit $42. That might not sound like a great 15 year return, but there were dividends to be made and the stock shrugged off the financial crisis. The 20-year return looks great, as does the 10-year return. If you had the capital I would hold it for the dividend and write calls against the position to boost returns, but keep the strikes above and rolling forward with the stock. The Coca-Cola Company (NYSE:KO) is stable and consistent, and a good price would be the current price as long as you are looking out into the future.

Conclusion

Is the market teetering on the brink? Maybe, but the economy is actually doing better. A down market does not mean a down economy. The Coca-Cola Company (NYSE:KO) is the safest stock in this article, and I would like that with Seaspan Corporation (NYSE:SSW) for collecting capital appreciation, dividends, and writing calls. Annaly Capital Management, Inc. (NYSE:NLY) is the most problematic, because rising interest rates will reduce book, value while keeping the rates low will compress the spread. Both those events can be viewed as negatives even though they are direct opposites of one another. A shake-out seems likely, even if the stock will do well eventually, so the risk due to uncertainty is high.

The article Consider Dividends While Worrying About a Correction originally appeared on Fool.com and is written by Nihar Patel.

Nihar Patel has no position in any stocks mentioned. The Motley Fool recommends The Coca-Cola Company (NYSE:KO) and Seaspan. The Motley Fool owns shares of Seaspan. Nihar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.