The “Fiscal-Cliff Defense” Stock You Need To Buy Now

22 | By Michael A. Robinson

First, it was the mess in Syria.

Then we had to deal with the whole Team Bernanke “taper drama.”

And now we’re barreling into yet another “Fiscal Cliff” street fight.

With U.S. stocks trading at unsustainable highs, I can sympathize with those of you who look at these headlines with fear; you view each day’s events as just the latest potential investing calamity, and worry they might ignite a single-day sell-off severe enough to eviscerate years of diligent saving and personal sacrifice.

I can even understand why many of you would like to scamper to the supposed safety of the sidelines.

But don’t do it.

The sidelines, you see, aren’t as safe as you might think. Missing the good days can be worse than riding out the bad ones. And you run the very real risk of getting left behind: 57% of American investors don’t even have $25,000 to their name.

But there’s a way to stay invested – to keep pursuing the life-changing profits that the “right” tech-sector stocks can deliver – even as you muscle aside the painful gut punches that today’s volatile markets can inflict.

I’m going to tell you about it today.

And I’m even going to show you the one stock that will let you put this “Fiscal Cliff” defense strategy to work.

In Growth We Trust

If you’ve been joining our talks here at the Strategic Tech Investor over the past six months or so, then you know that I’m a big believer in the profit power of high-tech growth stocks.

I want my readers to break free of the “zero-net-worth” syndrome that afflicts far too many of America’s households.

My Five Tech Wealth Rules have already delivered some very big winners for many of you. And a number of the remaining recommendations have set the table for profits still to come.

Over the long haul, I firmly believe that high-quality, tech-focused growth stocks are the key to meaningful wealth.

But I’ve also said there’s room for solid dividend plays … especially the kind of higher-yielding tech companies that are continuing to grow their businesses.

Indeed, now’s a very good time to be looking for just that kind of stock.

U.S. companies are fat with cash right now, and have nearly $1.7 trillion on their corporate balance sheets.

And as I’m going to show you, tech firms top that list.

New Doings in Redmond

Just last week, in fact, Microsoft Corp. (NasdaqGS: MSFT) said it was boosting its dividend by a whopping 15%.

The elevated dividend will cost the company an extra $1 billion a year. But with $56 billion in cash and equivalents on hand as of June 30, the Redmond, Wash.-based Microsoft made a move that will hearten existing shareholders and draw in new institutional players – without hampering the company’s strategic flexibility one iota.

With shares of the world’s dominant marketer of PC software currently trading at about $33.50, the new 23-cent payout brings Microsoft’s dividend yield to a very-decent 2.7%.

In fact, “very decent” may be an understatement …

We’ve all heard pundits repeatedly talk about “historically low” interest rates.

But have you really stopped to look at what this actually means?

Because it’s pretty doggone dramatic.

As of last week, the yield on a one-year U.S. Treasury note was a mere 0.10%. Basically, for every $100 you lend to the government for the next year, they give you back a dime.

So if we use U.S. Treasury yields as our yardstick, Microsoft’s dividend payout makes it seem like Fed Chief Ben Bernanke personally handed us the keys to a bank vault.

Assuming the stock merely breaks even over the next year, for every $100 you invest, you get back $2.70. That’s roughly 24.5 times the return you get on short-term U.S. bonds.

And Microsoft is our kind of dividend stock – the kind that I referenced above. It’s a company that offers a nice payout – and has a shot at some substantive upside growth. (As the investment pros that I deal with would say, it’s a stock that offers a strong-and-potentially growing income stream … with the chance for capital appreciation.)

In the parlance of institutional players, there’s suddenly “upside potential” in this leader-turned-laggard because there are some very clear “catalysts” at work.

In the last several months, Microsoft has unveiled a sweeping corporate restructuring … has said that longtime CEO Steven A. Ballmer will retire … and announced a $7.2 billion deal involving the mobile-devices unit of Nokia Inc. (NYSE ADR: NOK).

I don’t think the stock will just stand still for the next year. If it can even manage to match the previous one-year gain of 7.3%, your “total return” (capital appreciation plus the dividend payout) rises to 10%.

That kind of return might fit nicely in a portion of your portfolio – say in your kid’s college savings account … where slow-and-steady is a great way to plan ahead and still sleep soundly at night.

A New King in Cupertino

We’re seeing a very similar story over at Apple Corp. (NasdaqGS: AAPL). Last year, new CEO Tim Cook decided to use some of the i-Device pioneer’s $100 billion cash hoard to pay a special dividend to shareholders. That $2.65 payout worked out to a 1.8% yield.

Since then, the Cupertino-based Apple has announced plans to pay a regular dividend. The current payout of $3.05 a share was up 15% from its February predecessor – and represents about a 2.6% yield at current prices.

There’s a new growth story taking root at Apple, as well, with record-setting sales of the new iPhone, a hot new mobile operating system and a racy new chip that’s lighting up global tech blogs.

Thanks, in part, to these developments, the onetime tech titans of Microsoft and Apple have reinvented themselves as growth-and-income plays.

But as new members of the dividend-payout club, it’ll be quite some time before either of these two digital tech players can join a group of elite stocks known as the “Dividend Aristocrats.”

And that brings us to the “Fiscal-Cliff defense” stock that I want to tell you about today.

A New Aristocrat

This group of income-producing aristocracy is composed of about 50 stocks that have a history of increasing their dividends for 25 straight years. The list spans roughly 10 business sectors and includes companies that still have room to grow.

As luck would have it, one of my favorite medical technology stocks was added to the list two years ago.

I’m talking about the Minneapolis-based Medtronic Inc. (NYSE: MDT), a company that I’ve followed for many years.

Medtronic is the world’s largest independent medical technology company. About half of the company’s business is devoted to heart-problem treatments. The rest is apportioned among vascular diseases, diabetes, neurological conditions, surgical technologies and spinal care.

Not long after its founding in 1949, Medtronic pioneered the use of electrical stimulation to treat irregular heartbeats. Today it’s a global firm that does business in 140 countries.

And if we peruse some of the financial metrics that I use to analyze the stocks I recommend here at Strategic Tech, it’s clear that this is a very profitable company.

Medtronic has profit margin of 21% and a return on stockholders’ equity (ROE) of 21%. It posted a 10% increase in profits last quarter.

But given the valuation levels that we’re seeking in many U.S. stocks, Medtronic’s shares aren’t at all pricey. With a market cap of $53.8 billion, the stock trades at $53 a share and has a forward Price/Earnings (P/E) ratio of about 13.

This stock also underscores the strength of our thesis about how high-tech dividend plays can be used to offset worrisome headlines and other troubling market developments – the “potential investing calamities” that I referenced at the start of our talk today.

And this potential calamity is Obamacare.

The pundits and other so-called “experts” predicted that this stock and others like it were going to get pole-axed by Obamacare. The reason: The new healthcare plan hits medical-device makers with a 2.3% excise tax that analysts were saying would be difficult to pass on to customers.

Instead of getting pole-axed, Medtronic pole-vaulted: Even with the market’s weak August, Medtronic is up 29% year-to-date – or 60% better than the 18% surge of the benchmark Standard & Poor’s 500 Index.

Medtronic’s ability to shrug off the downer developments of Obamacare was twofold in nature.

First, the company has been adding global muscle – thereby increasing the amount of its business that’s not subject to Obamacare’s most-onerous elements.

And, second, Medtronic took a page out of its own business plan and shocked its dividend by 7.7%. That boosted the payout to 28 cents a share – and gave the shares a comforting 2% yield.

Expect this “growth-in-business/growth-in-dividends” strategy to continue.

Here’s why.

Over the next several years, Medtronic plans to greatly increase sales in emerging markets. Last year, it bought China’s Kanghui Holdings, a specialist in orthopedics, a burgeoning sector in the world’s most populous nation. And recent reports show that the medical-device firm has been hiring more in China.

And now that Medtronic has joined the “Dividend Aristocrats” club, expect the company to keep boosting its dividend. There’s a tacit marketing value in being part of that elite group. The “aristocrat” strategy is detailed in thousands of media reports each year, money managers base strategies and paid products around it, and dividend-focused institutional investors key on them as income stocks of the highest quality.

In the meantime, Medtronic keeps running its basic businesses with a relentless commitment to growth through innovation.
Late Monday, for instance, at the Heart Failure Society of America’s 17th Scientific Annual Meeting, Medtronic announced that brand-new clinical trial results showed that heart-failure patients treated with a company-enhanced defibrillator experienced a 46% reduced risk of atrial fibrillation (AF) – a common heartbeat rate or rhythm issue.

That’s a great example of why I like this company. Remember, Medtronic pioneered electrical stimulation of the heart way back in the very early 1950s – developing the core-competency on which the company’s future was built.

Unlike so many companies, Medtronic hasn’t forgotten the fundamental know-how that first made it a leader. And by continuing to invent, and then improve on those inventions, Medtronic built itself into a great company, and then added other bits of know-how along the way.

This is just one of those tech-related stocks that will magnify the value of your stake over time – and that will also pay you handsomely while you wait for that payoff.

And we’ll have more … soon.

[Editor’s Note: I welcome your comments. And your questions. Please let me know what’s on your mind… share with me your investment stories… and let me know what excites you in technology right now.

22 Responses to The “Fiscal-Cliff Defense” Stock You Need To Buy Now

  1. maurice richer says:

    michael, it’s ok to give out these stock good numbers but if people only have less than $25,000.00 in savings, how are we to even think of buying a $53.oo plus share stock. these are for onlya few well to do individuals.even stocks in the $3.00 to 6.00 range can be difficult to buy for some of us in large enough quantities to make a significant difference in our portfolio.

  2. Barbara Clay says:

    Not only do I believe that Medtronic is going to take a beating with Obamacare, but it provided the instruments that caused 3/4 deaths from Creustveldt Jacov Disease in NH. I know personally because my husband died of that disease a year ago, although he had not had brain surgery. The instruments cannot be sterilized at high temps without damage. And there are other deaths in Ma.

    So if you’re going to invest, which I never would, wait until at all comes crashing down for Medtronic.

  3. Lorraine Ripley says:

    This sounds like its a mutual fund of some sort. Is that correct?
    What is the buy in?

    I have great interest in buying silver and gold. I don’t know how to go about that.
    I want to start with an initial investment of $500.00 to $1,000.00.
    I can’t afford to loose this money and that is why I thought gold and silver would be a good investment. What is your advice?

    • Michael Robinson says:

      Hi Lorraine,

      Thanks for taking the time to contact me and for being a subscriber. I really appreciate it. However, I have to tell you that the focus of Strategic Tech Investor is technology investing. So, although I certainly keep up with what’s happening in the gold and silver market, I can’t really guide you as to specific silver and gold investing per say, which companies are the best and so forth. But several of my esteemed colleagues at Money Morning do follow gold, silver, oil, all commodities. Go to Then click on the archives link. Type in gold and silver and you should find a whole slew of information. I wish you the best of luck with your financial endeavors.

      Cheers and best wishes,


  4. George Jacobs says:


    I’m so glad you drew my attention to Medtronic. I had continuous atrial fibrillation for a year and a half and a highly recommended specialist gave electro-cardioversion (apparently developed by Medtronic) a slim chance of working for me. My young cardiologist was willing to give it a try and on the third try it worked! My heart has been steady as a rock ever since (going on two years). I’m 70 and feel as if I’m getting younger all the time. I’m investing, not only for financial reasons.

    George Jacobs

    • Michael Robinson says:

      Hi George,

      Thanks so much for sharing your experience with me. Very much appreciated. I love your spirit and attitude. When we meet, remind me not to arm wrestle with you. I would hate to lose in public!!

      Cheers and best wishes,


  5. Raven Rivers says:

    I thought you gave some good ideas and its nice to hear what you pros
    think are the good investments for our comming questionable times. Thanks.

  6. DAVID VAN DYKE says:

    I find it strange that you would choose a medical stock as a defense against what is going on in the government right now. and a medical stock that is going down. Every indicator I follow indicates it is ready for the “C” leg down. Isn’t it a bit wrong to recommend a stock that is declining, and not a defense against the downtrend right now, to unsuspecting investors?

    • Michael Robinson says:

      Hi David,

      Thanks for reaching out to me. I appreciate your support. Let me say that you are clearly a very savvy investor with solid charting skills. However, Strategic Tech Investor is about sharing tips, strategies and insights. It’s not set up to be a charting service.

      One of my themes here is to lay foundations and invest for the long haul, and then look for more aggressive investments that can trounce the market. In that regard, I feel like Medtronic makes sense as a dividend-foundational play, and it is at the very least a great case study.

      Now then, from a technical standpoint, I like how the stock appears to have bottomed out on Aug. 28 with the appearance of the shooting star/inverted hammer. The stock has trended up since then.

      I also like the fact that it has entered a fairly narrow channel within the Bolinger Bands and how the 10, 20 and 30-day EMAs have tightened and made a run at the 50-day line. I also think last week’s positive FDA news for Medtronic will help the stock in the short run.

      Once again, thanks for your interest. I hope this information helps.

      Cheers and best wishes,


  7. alex says:

    This sounds like a great investment at a time when I have a lot of dry powder. I am expecting a big correction. But as usual the question is when. Hence, I feel much happier investing in a growth company with a solid reputation and dividend. If a crash comes soon it will resist better than pure a pure growth stock, and if there is no crash… well it should still grow.

    On a more general note. I am writing from Switzerland. I am very concerned that the Dollar is going to continue loosing value against the the Swiss franc (and even the Euro). If you have any global tech growth stocks such as those you recommend which are based in the U.S. it would make me feel that much more comfortable.

    Thanks for your great recommendations, I have been making quite a bit of money since I have started paying close attention to your articles.

    Best regards,


    • Michael Robinson says:

      Hi Alex,

      Thanks for touching bases with me. I understand your concern about the value of the dollar. I will keep your suggestion about global tech stocks in mind for upcoming columns. And congrats on your investment success.

      Cheers and best wishes,


  8. Steve says:

    It would be really helpful to those of us trying to absorb large amounts of investment information each day if you would put your “hot tip” at the top of your recommendation posts. Right now these are down near the end, and there is so much to wade through on the way that it gets hard to find out quickly what you are recommending and why.

  9. Kash Prakash says:

    One of the news segment predicts 3D printing stock DDD, as well as INTC for growth in 2014 and beyond, MSFT is indeed a good buy now as well as AAPL although one cannot affor AAPL at even 400 dolllars (100 shs=40,000 dollars
    Be that as it May, What do you think of the much touted Managed accounts?

    Thank You


  10. Ruth Torrey says:

    I’m like Lorraine; I have only a little money to invest and I don’t know how to get started. The only money I have invested at the present is in a 403(b) plan at work.

    Like George, I’m particularly interested in Medtronic, since my husband just had their ICD implanted last month. We just today received the CareLink Home Monitor, and my husband is in the process now of setting it up.

  11. Malcolm Jensen says:

    Maurice Richer – Just buy 20 shares of Medtronics for a little more than $1,000. The fact that you have few shares is of no importance. You have money invested in a good company. If it goes up 10%, your shares go up 10%. Having more shares of lesser value is not at all better. Just decide what percentage of your investable dollars you want in a particular investment. Don’t worry about whether you buy many low-priced shares or few high-priced shares. It makes no difference at all.

  12. Dividend says:

    I think you have the dividend information for Microsoft incorrect. Microsoft’s dividend increase was from 23c to 28c which is a 21.73% increase, which would yield around 3.3% on a stock price of 33.5

    • Michael Robinson says:

      Hi Dividend,

      Thanks for reaching out to me. Turns out, you are in fact correct. It was a 5-cent dividend boost to 28 cents a share for a 21.7% increase. Sorry about the wrong percentage increase in the column and thanks for pointing that out to me.



  13. Neil Hollingworth says:

    Thanks always for your recommendations & reasoning ,but Michael may I ask you as an avid sailor &tecky could you please explain or guess lol, what team USA Oracle did to their boat to dramatically turn around their fortunes from where they were -8 1 down to team New Zealand to come back & win 9 -8& break mine & all New Zealand hearts

    Regards Neil

    • Michael Robinson says:

      Hi Neil,

      Well as it turns out I have a direct connection to that team. My good friend was the tactician who stepped away and was replaced after Team Oracle was down for the count. We were all shocked because John Kostecki knows the Bay as well as any one on this Earth.

      But Team Oracle really gelled on the water and kept making adjustments to the boat to gain upwind speed where they were really weak for a time. So, after every race day they went back to the dock for meetings and fine tuning. Also, you can’t discount the impact of winning six starts in a row. Those are the fastest sailboats I have ever seen, and winning the start in a craft like that is a huge advantage.

      While I feel for you guys, I just have to say I was on fire with that win. I missed the last race due to flying back from New York but I got a text on the BART train home from my wife that we won and just leapt out of my seat.

      As someone who has sailed the Bay for nearly 30 years it’s just great to see an SF sailing club win. And it happened during Oracle Week. So, it was a great combo of tech and sailing. What could be better than that (well if you live in the States, that is.)

      Cheers and better luck next time,


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