UBS Top Dividend Stocks to Buy as Quality Growth at a Reasonable Price

Print Email

For some time we have kept a close eye on the UBS Quality Growth at a Reasonable Price list (Q-GARP) of stocks to buy. The firm focuses on names that make good sense for investors, but stay far away from pricey, and sometimes dicey, momentum names. The list is constructed using an initial quantitative screen of stocks based on: 1) quality metrics—high and stable profitability, 2) growth—high expected earnings growth, and 3) valuation— low valuation relative to peers. The final list is a compilation of quality growth stocks that the analysts believe are trading at attractive valuations.

We screened the Q-GARP list for the stocks that paid the best dividends. With the top dividend-paying stocks, you not only get priced fair-priced stocks, but the added bonus of return of cash in the form of a dividend. This helps with the total return profile. Here are the top yielding Q-GARP stocks to buy at UBS.

Apple Inc. (NASDAQ: AAPL) remains a top stock on the radar screen. Excitement over the new iPhone 6 is starting to gain traction as rumors of a larger screen and other new improvements are getting the Apple nation stirred up. Trading at just 12 times forward earnings, the stock remains a solid buy for investors. Shareholders are paid a 2.3% dividend. The UBS price target for the technology giant is $625. The Thomson/First Call consensus price target for Apple is $591.52. The stock closed Tuesday at $531.22.

Coca-Cola Co. (NYSE: KO) is one of the most recognizable brands in the world, and the biggest shareholder is Warren Buffett. The company a raised its dividend by 9%, its 52nd annual dividend increase. While sales growth has been sluggish recently, UBS believes the company is taking the right strategic action to reinvigorate revenue growth. Investors are paid a solid 3.2% dividend. The consensus price target for the stock is $43.88. Shares ended Tuesday at $38.40.

Colgate-Palmolive Co. (NYSE: CL) is a top consumer staples name to make the UBS. Colgate sells its products in more than 200 countries and makes more than 75% of its revenue outside the United States, which provides geographic diversification and growth opportunities in emerging markets for the company. This diversity, matched with a huge list of consumer products, keeps revenues and dividends growing. Investors are paid a 2.3% dividend. The consensus target is $67.14. Colgate closed Tuesday at $64.34.

E.I. du Pont de Nemours & Co. (NYSE: DD) is rated as a chemical sector stock to buy on the Q-GARP list. The company had outstanding earnings and is benefiting from the strong manufacturing growth in the United States and abroad. DuPont is a stock that fits into the diversified conglomerate category. Shareholders are paid a solid 2.7% dividend. The consensus price target is $66.71, though DuPont closed Tuesday at $66.80.

Home Depot Inc. (NYSE: HD) is a top consumer discretionary name and a name to focus on with spring just around the corner. The stock is also a new addition to the Q-GARP list. CNBC’s Jim Cramer made it one of his target stocks to own for 2014. The continued housing strength combined with do-it-yourself upgrades is driving strong earnings for the stock. Investors are paid a 2.4% dividend. The consensus price target is $89.60. Home Depot closed Tuesday at $79.82.

Medtronic Inc. (NYSE: MDT) operates in two segments: the Cardiac and Vascular Group and the Restorative Therapies Group. The UBS team thinks the company has the appropriate strategic focus and has a number of new products in the pipeline that along with continued emerging market performance should lead to acceleration in growth. Longer term, they also believe Medtronic should benefit from its size and scale. Investors are paid a 1.9% dividend. The consensus price target is $64.13. Medtronic ended trading Tuesday at $59.77.

Qualcomm Inc. (NASDAQ: QCOM) may be on the verge of making its gigantic world even bigger. Smartphone industry expert Tom Kang of CounterPoint recently said that he believes Lenovo will mainly rely on Qualcomm chips for handsets shipped outside China due to intellectual property reasons. After a nine-month integration period for the Motorola acquisition, Lenovo will initially target the United States and Latin American markets. The chip giant trades at a low 14.3 times forward earnings. Investors are paid a 1.9% dividend. The UBS price target is $84. The consensus price target is $81.20. The stock closed Tuesday at $77.45.

Starbucks Corp. (NASDAQ: SBUX) dominates the retail coffee business in the United States, and the international growth is helping to boost earnings. In fact, the brand has become so ubiquitous that consumers often just say “Let’s grab a Starbucks.” Despite a pricing point that is higher than others, the company continues to add new items at its stores, which have been received well. Investors are paid a 1.4% dividend. The consensus price target is $88.12. Starbucks closed Tuesday at $74.60.

United Technologies Corp. (NYSE: UTX) is a top industrial name on the Q-GARP list. United Technologies provides high technology products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems, Pratt & Whitney and Sikorsky. Investors receive a 2.1% dividend. The UBS target for the stock is $125, and the consensus figure is $125.70. United Technologies closed Tuesday at $114.80.

While the UBS Q-GARP dividend leaders are not the highest paying on Wall Street, they are among the most reasonable pricewise. That is the reason for their inclusion in the first place. The added bonus of solid dividends makes the stocks on the UBS list suitable for almost all portfolios, especially long-term holders, who will benefit from the solid total return potential.