Jefferies Says Buy These Dividend-Paying Companies That Missed Expectations

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We have written on numerous occasions that it has become harder with each passing trading day to find stocks that are not sky-high expensive. We are in the phase of the bull market in which stocks are melting up, because worried portfolio managers are concerned with performance and retail investors don’t want to miss the train leaving the station.

The Dow’s 12th record close Monday was the longest winning streak since 1987, and we know what happened then.

The Jefferies U.S. Insight team, along with the firm’s stable of outstanding analysts, looked through their coverage universe for companies that are still attractive, and they noted this:

We have highlighted 10 Buy-rated stocks which have underperformed since earnings report and where our analysts believe post-quarter selloffs are overdone and the underperformance offers opportunity. Two of these ten stocks are on our Franchise Picks list and in most of these cases, Jefferies’ fiscal 2017 earnings-per-share estimates are ahead of the Street’s.

We picked five that are solid companies that also pay very good dividends. In the event they stay out-of-favor, investors will get paid to wait. Two even make the Jefferies Franchise Picks list.

CA

This is a company for which the new business may be growing faster than renewals. CA Inc. (NASDAQ: CA) provides information technology (IT) management software and solutions that help organizations plan, develop, manage and secure applications and IT infrastructure in the United States and internationally. The company operates through three segments: Mainframe Solutions, Enterprise Solutions and Services.

CA Technologies’ APM solution stands out with its customer experience capabilities, managing real-user transactions via JavaScript injection, SDK and deep packet analysis, ability to manage microservices and containers, and strength in its analytics engine to ingest a variety of sources.

The stock was hit on poor 2017 guidance is the fiscal third-quarter results, but the analysts feel even a small shift in growth could move the shares.

CA investors receive a 3.13% dividend, which protects some against downside. The Jefferies price target for the stock is $38, and the Wall Street consensus target is $32.80. Shares closed near that level Monday at $32.57.

Chevron

This integrated giant is a safer way for investors looking to stay long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is an integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas. Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.

Jefferies just added the stock to its Franchise Picks list, and while the company missed estimates badly, the analysts feel the company is the best positioned integrated.

Chevron investors receive a 3.87% dividend. The $147 Jefferies price target is a Wall Street high. The consensus target is $126.25, and shares closed Monday at $111.75.