UBS Dividend Ruler Stocks Keep Raising Payouts: 4 to Buy Now

August 8, 2017 by Lee Jackson

One thing that should be a huge tailwind for investors in the near future is stocks that provide solid total return. With the market priced to perfection, stocks that pay dividends and have the chance to go higher in value can provide the total return that may become crucial, as advances in the market probably will slow down going forward.

In a new research report, the portfolio team that runs UBS’s Dividend Ruler stocks was able to report a very solid earnings season from their companies. The report noted this:

For Dividend Ruler stocks, the earnings season has impressed. Twenty-six of the 30 Dividend Ruler stocks have reported results and aggregate earnings should be up 18% versus year-ago levels; 13% excluding the out sized percentage earnings gains from the two energy companies in our model portfolio.

In addition, over the past two months four companies in the portfolio have raised their dividends. All four make good sense for long-term investors looking for sensible stocks to own, and the fact that three are based in Europe is an added bonus.

British American Tobacco

While many investors eschew tobacco stocks, this company is also focusing on smokeless products. British American Tobacco PLC (NYSE: BTI) is the largest European tobacco company and the second-largest listed global tobacco company. It has subsidiary operations in most major markets across the globe, other than in the United States, where it is represented by its 42% owned listed associate Reynolds-American. British American Tobacco is viewed as an industry consolidator.

The company’s solid brand portfolio makes it a Wall Street favorite, and it tends to outperform the market and has consistently gained market share. In addition, its 42% of Reynolds American provides sales of the popular Camel and Newport brands. The report noted:

The company pays a semiannual dividend and raised its interim payout by 10% in July after lifting its final dividend by 13% early in the year in February. Management noted in its second quarter earnings call that they “remain committed to rewarding shareholders with an increasing dividend.”

Shareholders receive a 3.37% dividend. The UBS price target was posted in British currency. The Wall Street consensus target is $78.93. Shares traded early Tuesday at $65.40.

Diageo

This is one of the largest producers of alcoholic beverages in the world. Diageo PLC (NYSE: DEO) produces, markets and sells beverages worldwide. It offers scotch whiskey, gin, vodka, rum, beer and spirits, Irish cream liqueurs, wine, Raki, tequila, Canadian and American whiskey, Cachaça, and brandy, as well as adult beverages and ready to drink products. The company’s premium brands include Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness.

Diageo’s reserve brands include Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie Walker Gold Label 18 year old, Johnnie Walker Gold Label Reserve, Johnnie Walker Platinum Label 18 year old, John Walker & Sons Collection, Johnnie Walker The Gold Route, Johnnie Walker The Royal Route and other Johnnie Walker super premium brands, as well as The Singleton, Cardhu, Talisker, Lagavulin and other malt brands.

The company pays a semiannual dividend, and after raising its interim dividend by 5% in January 2017, the company raised its final dividend by 5% again last month. Good news for investors looking for income.

Shareholders receive a 2.42% dividend. The UBS team has a Buy rating, but the price target also was posted in British currency. The Wall Street consensus price target is $141.19, and shares traded Tuesday at $133.10.

Medtronic

This company is based in Ireland after its merger with Covidien two years ago. Medtronic PLC (NYSE: MDT) is a medical devices giant, and many on Wall Street saw its historical merger with Covidien, probably one of the largest in the med tech industry, as a momentous event, leading to the creation of a unique company that combines the extensive and innovative abilities of both companies. The combined company officially has joint forces of over 85,000 employees in more than 160 countries.

Top analysts feel that the contributions from Medtronic’s three growth drivers, which they cite as therapy innovation, globalization and services/solutions, should support a 5% or greater constant currency top-line growth this year and beyond.

UBS noted this:

Medtronic delivered a 7% dividend increase – the 40th consecutive year of rising dividends for the company. Over the past four decades, Medtronic has increased its dividend at a 17% compound annual growth rate.

Investors receive a 2.2% dividend. UBS has a $95 price target. The consensus target is $92.42, and shares were last seen at $84.30.

UTC

This very diversified company with large government contract exposure is also on the UBS Bellwether list of high-conviction stock picks. United Technologies Corp. (NYSE: UTX) is an industrial that provides high-technology products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems and Pratt & Whitney.

Many Wall Street analysts believe the company is strategically positioned to benefit from two megatrends in the long-term: urbanization and commercial aerospace. The company received good news recently as the military and foreign buyers are set to increase purchase of the F-135 Jets. UTC’s Pratt & Whitney division, which builds the F135 engine for the military, earns a superb 22.5% profit margin on its products.

The analysts noted:

The company hiked its quarterly payout by 6% to $0.70. Chairman and CEO Greg Hayes noted: “Today’s announcement to increase our dividend reflects our ongoing commitment to remain disciplined in our capital allocation and deliver value to shareowners through our long-term growth strategy.”

Investors receive a 2.3% dividend. The $135 UBS price target compares with the consensus estimate of $127.90. The stock traded Tuesday at $118.30.

While not cheap, these stock still present among the best ideas for growth and income accounts now. In addition, there is every reason to believe they will continue raising cash dividends to shareholders on a regular and timely basis.

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.