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By Jeremy Glaser | 12-01-2009 11:34 AM

Josh Peters' Dividend Hunting Grounds

The Morningstar equity strategist on where he's finding opportunity today, plus a contrarian play.

Jeremy Glaser: I'm Jeremy Glaser with Morningstar.com. It's Ideas Week, and I'm here today with Josh Peters, editor of Morningstar DividendInvestor, to talk about his top dividend picks for 2010. Josh, thanks for joining me.

Josh Peters: Happy to be here.

Glaser: For investors looking into the new year, what are some of the things that they might want to consider for a dividend portfolio?

Peters: I think that it's the same basics that are in place for most years. You want to find good companies, good businesses, that are capable of paying out an adequate dividend. I'd put that at anywhere from 2% or better, preferably 3% or better for current yield. And that the business is in a position to grow that dividend over time, both that the business is growing, so you've got the means, and management is willing to raise the dividend and has shown a track record of doing that.

Glaser: So what particular sectors do you think look attractive now for dividends?

Peters: I actually think this isn't such a great time to game the economy and be betting very strongly on a vigorous economic recovery. My favorite sectors right now are pretty defensive. I like some of the better health-care names. Abbott Laboratories is a good name that comes to mind, with about a 3% yield, close to a double-digit growth rate long-term for that business. Not a lot of patent exposure.

And as health-care reform finally works its way toward some eventual conclusion, that's going to lift a lot of uncertainty from the sector. I think people will start seeing these businesses for what they are again. This is a very good total return story that a lot of investors have overlooked this year.

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