The Top-Rated Consumer Defensive Stocks With Yield Above 3.5%
We like using stock screens to look for investing ideas, not so much to find new investments but to remind us (after all these years) of good investments and, more...
The Wonderful World Of Stock Screens
We like using stock screens to look for investing ideas, not so much to find new investments but to remind us (after all these years) of good investments and, more specifically, the right investments for the right times. Today’s screen was focused on high-yielding consumer defensive names and what we’ve turned up is not all that surprising. Among these names are two of the bluest of blue-chip tech stocks and a host of energy stocks that are not only lightly valued but on the brink of increasing their capital returns and riding a wave of analyst upgrades
Verizon Is The Highest Yield, And A Good Buy
Verizon (NYSE: VZ) tops our list of high-yield consumer defensive stocks with a payout worth 5.05% with shares trading at $51. The payout is growing as well, coming with an 18-year history of distribution increases and a low 46% payout ratio as well. In our view, the share price may be stuck in a range and it may even move lower but the dividend is safe. As for the value, Verizon is trading at only 9.5X its earnings compared to about 15X for the average S&P 500 company and it pays more than twice the yield. The outlook for growth isn’t robust but it is present and underpinning the stock’s price.
There are 15 analysts with current ratings on Verizon and they have the stock pegged at a Hold. In our view, this amounts to a Buy for those without a stake in the company and there is some upside potential as well. The consensus price target has been edging lower over the past year but is still 14% above the price action. The latest shoutout comes from AllianceBernstein which ranked it #6 on its list of top sticky stocks. Sticky stocks are stocks whose owners tend to buy and hold and have more muted reactions to earnings misses.
The Energy Sector, Again…
If you need another reason to be interested in the energy sector other than the rise in oil prices, the unrelenting wave of upgrades, or the low valuation you can add high yield to the list. The energy sector, including Exxon Mobil (NYSE: XOM), Shell (NYSE: SHEL), and Chevron (NYSE: CVX) occupy spots 2-4 in our screen results and they all yield about 4.0% at recent price levels. Exxon and Chevron are, notably, also on the list of top Stick Stocks and Exxon just garnered another upgrade as well. The upgrade comes from Piper Sandler and is a double-upgrade from Neutral to Overweight with a price target of $109. This target is 15% above the current consensus, a consensus that is trending higher, and implies about 24% of upside on top of the 4% yield and expected increase in distribution and share repurchases. If you’re not interested in individual Energy stocks there is always the Energy Sector SPDR (NYSEARCA: XLE) as well and it yields about 3.75%.
Intel, The Highest Yielding Tech Stock We Want To Own
There may be higher-yielding stocks in the tech sector than Intel (NASDAQ: INTC) but they aren’t any names we’re interested in. Intel, on the other hand, is among the most established tech firms on the market and fundamental to the tech industry. The stock also yields about 3.6% and has a positive outlook for dividend growth. While the sentiment for chip stocks has been slipping in recent weeks, the outlook for the industry is still bullish, and expecting at least 24% of upside for the stock. Regardless of the Q2 results, however, the stock is trading at an attractive 11X its earnings which, along with the dividend, makes it an attractive stock in a no-growth environment.
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