24/7 Wall St.

High-yielding dividend stocks (such as utilities and telecom sector stocks) have significantly underperformed both the S&P 500 and high-dividend growth stocks over the past five months as interest rates have increased. Despite this underperformance, S&P 500 stocks with the highest dividend yield still look expensive relative to history.

In a new report, the Dividend Ruler research team at UBS continue to strongly favor high-dividend growth stocks over stocks with high dividend yields. They believe relative valuations remain attractive and high-yielding dividend stocks are still vulnerable to a further increase in interest rates, which they, like most on Wall Street, expect over the next six to 12 months.

With the stock market approaching three-month lows, we went through the UBS Dividend Ruler universe to look for names that had backed up and now offer investors a good entry point. We found that some of the top stocks to buy have been sold off to levels that are very tempting.

Intel Corp. (NASDAQ: INTC) is breaking away from its reliance on personal computers (PCs) with the imminent launch of products built around the company’s latest Atom Z3000 Bay Trail system-on-chip family. These are low-power products aimed at everything from svelte seven-inch tablets to larger two-in-one PCs, such as detachable tablet/PC hybrids. The Thomson/First Call price target for Intel is posted at $23. Investors are paid an outstanding 3.9% dividend. Intel closed Thursday $23.10.

Clorox Co. (NYSE: CLX) has unveiled its strategic growth plans in an initiative called The 2020 Strategy, in which the company outlined its long-term vision. Clorox made good on its past strategic priorities, and the results speak for themselves. Over the past five fiscal years, Clorox has delivered a total stockholder return of 88%, compared to 40% for the S&P 500. Clorox’s easy-to-understand business model and focus on top brands allowed it to raise its dividend from $1.60 per share to $2.56 per share over the past five years, representing a 60% increase in that time. The consensus price target for the stock is $85. Investors are paid a nice 3.4% dividend. Clorox closed Wednesday at $83.51.

Coca-Cola Co. (NYSE: KO) remains one of the top holdings in Warren Buffett’s portfolio. It is also one of the most highly recommended stocks in the Dow Jones Industrial Average. Of the 30 stocks in the average, Coke is the number 11 broker pick. It has a huge basket of products to back up one of the most recognized names in the world, and the stock has sold off to offer a great entry point. The consensus price target for the venerable stock is $45. Investors are paid a very solid 3.0% dividend. Coke closed yesterday at $37.78.

Johnson & Johnson (NYSE: JNJ) recently became a player in the very aggressive and lucrative hepatitis C market when it purchased GlaxoSmithKline PLC’s (NYSE: GSK) treatment. This combined with its huge portfolio of products makes the stock a top diversified portfolio holding. The consensus price objective for the stock is $95. Investors are paid a 3.0% dividend. Johnson & Johnson closed Thursday at $87.78.

Occidental Petroleum Corp. (NYSE: OXY) may have a defining moment this week when it holds its annual board meeting. It is expected to announce a tax-free spin-off of the Oxy California business. While bears always have pointed to the 35% of earnings that come from the volatile Middle East, Occidental is one of the top names in the Permian Basin in Texas. We recently wrote about how the region may contain more than a billion barrels of oil. The consensus price target for Occidental is $108. The stock pays shareholders a 2.7% dividend. Occidental closed Thursday at $95.10.

United Parcel Service Inc. (NYSE: UPS) announced that it would be investing an additional $50 million to create nine new liquefied natural gas (LNG) fueling stations across the United States. This follows an April announcement that it would purchase 700 LNG-fueled tractors and build four fueling stations for $18 million. This may significantly lower costs for ground delivery and help improve earnings. The consensus price target for the stock is placed at $96.50. Investors receive a 2.7% dividend. UPS closed Wednesday at $90.28.

The UBS thesis that higher dividend-paying stocks are still expensive and vulnerable to the rising interest rates is spot on. The companies growing their dividends are rarely candidates to do an about-face and cut their dividends. With some of these top names selling off, investors have a prime opportunity to add them to their portfolios.