Five High-Quality Dividend Stocks For 2012

When assessing the current state of the global economy, Europe's debt crisis, and the downward trajectory of the stock market, it is hard not to be a little concerned heading into 2012. If the tremors that are being felt in financial markets turn into another full-fledged crisis in the coming year, there may not be many places for investors to hide out. As always, however, it is impossible to know with any degree of certainty what 2012 will bring in the stock market. For this reason, it is probably best to remain at least partially invested in equities despite the risks. For cautions sake, however, investors may want to focus on high quality, dividend paying names. The following five stocks should be reasonably good places to seek refuge from market volatility if things get rocky in the new year. All of these companies possess extremely high-quality global brands, solid businesses with proven long-term track records, and are yielding more than 2.50% at current levels.

- Even at current levels, with the stock up better than 27% in the last year, and 125% in the last 5 years, McDonald's remains a compelling investment which should hold up much better than the market. It has one of the most recognizable brands in the world and a truly global footprint which helps to protect the business from regional shocks in Europe, for example. At current levels, MCD is yielding 2.87%. The shares trade at a trailing P/E of 19.18, a forward P/E of 17.06 and a PEG ratio of 1.88. Valuation isn't cheap, but it seems fair given the company's track record of creating shareholder value, and its unique combination of a defensive, but growing, business model protected by an unmatched brand.

- This is another defensive business model which retains an impeccable brand and is experiencing growth. It also has a truly global, diversified footprint which enhances the stock's defensive properties. In addition to Pepsico's (

) outstanding beverage business, it also owns a preeminent snack and foods business in the Frito-Lay brand. Furthermroe, PEP offers a very healthy 3.19% dividend yield at current levels and is trading at a fairly compelling valuation. Over the last 3 years, PEP has formed a nice base between $60 and $70. In a strong market, the stock could easily break out of this trading range and move substantially higher, whereas in a weak market the downside should be limited relative to more volatile names.

- Coca-Cola

is very similar to both McDonald's and Pepsico in that it possesses one of the world's preeminent brands, and operates a business that has traditionally held up well in the face of macro headwinds. Despite its size, KO has been able to continue to deliver returns to shareholders through both price appreciation and dividends. For example, in the last five years, KO shares are up 38% versus a loss of 15% for the S&P 500. At current levels, KO is yielding 2.78%, which is quite attractive in today's low interest rate environment.

- Unlike the other stocks on this list, MSFT has been a bit of a disappointment in recent years. If 2012 proves to be defined by volatility and risk aversion, however, this is a name that should outperform while also paying out a nice dividend. At current levels MSFT is yielding 3.11%, and the company is positioned to increase its payout significantly - if it chooses. In a fearful environment, Microsoft is likely to retain its value due to its already dirt-cheap valuation and its massive cash hoard which can be used for share repurchases and dividend hikes. MSFT trades at a trailing P/E of 9.34, a forward P/E of just 8.48 and a PEG ratio of 0.98. Furthermore, the company has an absurd $57.4 billion in cash and cash equivalents on its balance sheet. If things get rocky in 2012, investors will likely look for refuge in this stock due to its solid dividend yield, massive cash holdings, and cheap valuation. If management finally becomes more aggressive in returning that cash to shareholders, it will only make the situation more attractive.

- Clorox is a much smaller company than the others on this list, but it retains many of the same attractive qualities. Clorox owns a portfolio of high-quality consumer products brands such as Kingsford charcoal, Brita, Glad bags, Hidden Valley Ranch, KC Masterpiece, and of course Clorox, among others. Not only are these businesses defensive in nature, they are also nicely diversified. In addition, CLX is yielding 3.68% at current levels and trades at a forward P/E of just 14.74. While McDonald's, Pepsico, Coca-Cola, and Microsoft are global behemoths, Clorox is a small company that is a bona fide acquisition target - which, in addition to the stock's other attractive properties, may help it hold up better in a down market. Earlier this year, legendary investor Carl Icahn disclosed a large stake in the company and then proceeded to offer as much as $80 per share to buy it outright if CLX was unable to find any other suitors in an auction. Icahn's bid to get Clorox to sell itself to either a competitor or to Icahn himself was abandoned this past September. Currently, shares are trading at $64.95 - well below Icahn's offer. While a deal in the near-term appears unlikely, if a Wall Street whale like Carl Icahn sees this company as a ripe acquisition target, it is a factor worth considering along with the stock's other attractive properties.