ETF Trends
ETF Trends

Large-cap stocks with big institutions backing them are offering investors income and a strong price performance, so why not consider an exchange traded fund (ETF) holding one or more of these companies for your portfolio?

Aryeh Katz for Investopedia says that there are several large-cap stocks that are yielding reasonable to very good dividends, small P/E’s with strong price momentum. But instead of picking individual stocks, why not try to capture the sector that these big companies represent to spread the risk around?

  • Altria (MO): With a market cap of $35 billion and a way to operate on non-cyclical business such as tobacco and beer, the dividend yield is 7.75%. P/E multiple is at 11.45 and 66% of the company is owned by institutional investors.
  • McDonald’s (MCD): A household staple that is priced to withstand the economic downfall, as well as profit in it. They currently offer investors a solid 3.68% dividend yield.  It trades with a P/E multiple of only 14.20, and 75% of this stock is owned by institutions. Usually during a down economic time, diners who would go to an upscale eatery will often choose McDonald’s (or other fast food) instead.
  • Verizon (VZ): One of the nation’s largest telecommunications companies, has a market cap of $88 billion and a payout annually of 5.94%. 60% of the company is institutionally held and the P/E is very reasonable at 13.77. Shares have appreciated 30% since the market bottomed in October 2008.

If institutions are loading up on big names right now, isn’t that telling you something? Strong fundamentals mixed with decent pricing is presenting opportunity now. Here are some ETF that hold these stocks; note that none of them are above their long-term trend lines yet, but watch them to see what they do:

  • iShares Dow Jones U.S. Telecom (IYZ): up 4.6% year-to-date; Verizon 15.85% of assets

  • PowerShares Dynamic Food And Beverage (PBJ): down 2.1% year-to-date; McDonald’s 5.1%

  • PowerShares Dynamic Consumer Staples (PSL): down 1.5% year-to-date; Altria 2.5% of assets

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.