Dividend Stocks to Keep You Safe Into 2012

Companies that pay among the highest dividends and post the fastest earnings growth are the best place to hunker down. Before selling equities and going to cash or Treasury bonds, consider staying in the market but remaining risk-averse with relatively safe dividend stocks. Still, that might be easier said than done, given the S&P 500's 5.6% decline in the past five trading days. But that's a strategy touted by many investment strategists, including Morgan Stanley analyst Adam Parker. "The right strategy to outperform in this environment is to focus on companies with sustainable dividends," which he refers to as "the 'best house on a bad block' logic."

Dividends have provided 42% of the S&P 500's total return over the past century, "so you do not want to ignore them," Parker says. Instead of picking stable blue-chip companies such as 3M or Procter & Gamble, Morgan Stanley recommends fast-growing companies. "The market has been rewarding companies that are beating on revenue more than those beating on earnings, and we think the scarcity premium on revenue growth will increase in a low-growth economy," he said in the report the report.

Source: The Street

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