PepsiCo, Inc. (PEP), Johnson & Johnson (JNJ), 3M Co (MMM): These Stocks Will Reward Investors for Years

Recent dip serves as an opportunity
As these stocks have dipped in tandem with the broader market, investors have the chance to buy them at more attractive prices.

PepsiCo, Inc. (NYSE:PEP), Johnson & Johnson (NYSE:JNJ), and 3M Co (NYSE:MMM) are all down over the past month, with Pepsi losing 7% over that time frame. It’s true that these stocks are still up strongly to begin 2013, but investors looking for a pullback to get into these high-quality names have their opportunity.

As a result of their recent declines, Pepsi, J&J, and 3M exchange hands for between 18 and 20 times their trailing earnings per share. Admittedly, these stocks are far from being bargains, but 18 or 20 times EPS is close to the broader market’s P/E, which stands in the mid to high teens.

And as the saying goes, premium businesses command premium valuations. Because these stocks hold such great track records, it’s no surprise that investors would (and should) pay an above-average price.

Another benefit of lower prices is that their dividend yields are now at higher levels for new investors. These stocks yield between 2% and 3% annually. 3M Co (NYSE:MMM) offers the lowest yield, but its 2.2% yield still matches the yield on the S&P 500. PepsiCo, Inc. (NYSE:PEP) and Johnson & Johnson (NYSE:JNJ) yield 2.8% and 3.1%, respectively, which handily beats the yield on the broader market.

The Foolish conclusion
These stocks have paid rich rewards to investors over many years, made possible because of their strong brands and the fact that their products and services are purchased every day, in a good economy or bad. And these steady dividend-payers have come off their recent highs, meaning investors can buy shares at more attractive prices. Long-term investors should hang on to these stocks with confidence, and new investors should consider buying in at these levels.

The article These Stocks Will Reward Investors for Years originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends 3M, Johnson & Johnson, and PepsiCo. The Motley Fool owns shares of Johnson & Johnson and PepsiCo.

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