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Two Perfect Summer Stocks

It is very hot in New York City right now. In fact, my husband and I just ordered a second air conditioner for our Brooklyn apartment, and I hate air conditioners. (They weren’t necessary where I grew up, near the ocean in Massachusetts. But it took just one June in...

It is very hot in New York City right now. In fact, my husband and I just ordered a second air conditioner for our Brooklyn apartment, and I hate air conditioners. (They weren’t necessary where I grew up, near the ocean in Massachusetts. But it took just one June in Manhattan for me to realize that summer in New York City is a totally different story.)

A lot of New Yorkers don’t even bother sweating it out here, and just leave for Long Island, the Jersey Shore or further afield. I think the more money you have, the less time you spend in the city in the summer. For about $500, a seaplane can get you from Manhattan to the Hamptons in 35 minutes, and helicopters taking off from financial district landing pads are a regular sight all summer.

Obviously, there are still some people on Wall Street—the NYSE is still open, after all—but it’s safe to say this is the quiet season down there.

Oddly, that doesn’t make for a quiet season for the stock market. Instead, the lack of muscle seems to translate, usually, into a lack of direction. That’s why I wasn’t surprised to see late June’s 4%-plus correction pretty much erased over the following couple of weeks. It goes up, it goes down ... but it doesn’t really go anywhere. That’s the definition of volatility. And I expect it to continue for the rest of the summer.

Of course, the market’s prime directive is to frustrate as many expectations as possible, so who knows, we could still see a strong trend develop over the next month. And if we do, I’ll be the first to recognize it and act accordingly. But for now, I’m not placing any bets either way.

Of course, that’s not a good investing system. If you’re not placing any bets, what are you supposed to do with your money?

Don’t worry, I have a solution, in the form of a couple of “summer stocks.” I call them that for a couple of reasons: one, they’re not very correlated to the overall market, so they’ll see less volatility than the major indexes this summer. Second, they don’t move too much and they pay dividends, so you can plop them in your portfolio, go to the Hamptons for a couple of weeks, and not worry about them. And three, they’re not trendy so they won’t fall out of favor while you’re away from your computer.

My first idea has a beta of 0.23, meaning it is theoretically 77% less volatile than the market. Plus it pays a quarterly dividend that yields 4.6%, so there’s no harm in letting it sit in your portfolio and slowly accrue gains while you sip a gin and tonic on the porch. Here’s the recommendation that was in the latest Dividend Digest, from Richard Young’s Intelligence Report:

“Of Fortune Magazine’s ‘Most Admired Electric and Gas Utilities,’ The Southern Company (SO) has scored first place in financial soundness each of the last four years. Southern’s service area stretches across the states of Georgia, Alabama, Mississippi and Florida, where it serves 4.4 million residents. Southern Co. owns 46,000 megawatts of electrical generating capacity. Alongside Southern’s power business, it is active in telecommunications and wireless communications.

“Southern Company’s board of directors has chosen to raise the company’s dividend in each of the last 12 years. This steady string of dividend increases has allowed Southern to maintain a dividend yield of over 4.3%, even while the price of the company’s stock has increased by more than 100% over the same time period.

“My investment thesis for Southern Company is simple: Southern’s regulated monopoly status makes its business much more resistant to economic downturns and competition. Keep it simple. You can see on my long-term chart that even after a recent run-up, Southern’s price is below its long-term trend. Buy.”

Southern Co. Long-Term Trend

—Richard C. Young, Richard C. Young’s Intelligence Report, June 2013

Of course, you don’t have to stick to utilities just because you want go on vacation. The next stock also qualifies as a “summer stock” but is most definitely in the growth camp. With a beta of 0.69, it is theoretically more correlated to the general market than SO, but should still be less volatile than the major indexes overall. Plus, it pays a quarterly dividend yielding 1.99%. Here’s the recommendation, from Vita Nelson’s via the latest Dividend Digest:

“Founded in 1897, Becton Dickinson and Co. (BDX) is a $19 billion medical technology company serving health-care institutions, life science researchers, clinical laboratories and the general public. Revenues exceeded $7.7 billion in fiscal 2012 (ended September 30), when it earned $5.37 per share. The company operates three divisions: Medical Systems (53% of sales), which makes needles, syringes, surgical blades and infusion therapy supplies; Diagnostic Solutions (33%), which produces sample collection kits and supplies and Biosciences (14%), which makes microbiology supplies, cellular analysis systems and labware.

“Consensus estimates call for BDX to earn about $5.75 per share in fiscal 2013 and $6.29 in fiscal 2014. In November, the board of directors approved a 10% hike in the quarterly dividend, from 45 to 49.5 cents per share, marking the 41st consecutive annual increase. The company also continues to repurchase shares, having already reduced the number outstanding from about 304 million in 1992 to 194.25 million now.”—Vita Nelson,, 6/17/13

That’s it for today. Now you can go enjoy the summer, wherever you are (unless you’re in the Southern Hemisphere).

Wishing you success in your investing and beyond,

Chloe Lutts Jensen

Editor of Investment of the Week

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Chloe Lutts Jensen is the third generation of the Lutts family to join the family business. Prior to joining Cabot, Chloe worked as a financial reporter covering fixed income markets at Debtwire, a division of the Financial Times, and at Institutional Investor. At Cabot, she is a contributor to Cabot Wealth Daily.