Despite a big ramp-up in volatility in September and October, the overall market trend continues to be a positive one. In fact, one top firm made the case Monday that the market could be cleared to trade to 2,300 on the S&P 500, as rates stay low and recent currency devaluations in Europe and Japan help to spur economic growth and improve the overall global picture.
In a new research note from the Dividend Ruler team analysts at UBS, they forecast that an improving U.S. economy and rising corporate profits could be the dominant theme driving stocks higher over the next several quarters. As we have reported recently, midterm election years have historically been extremely positive for stocks.
We scanned the UBS Dividend Ruler stock report update for the current highest yielding stocks in the portfolio. While dollar strength remains a concern, many of these top stocks have a balanced domestic and global business.
Dominion Resources Inc. (NYSE: D) is expected to grow its dividend 7% this year, in line with the past four years. The company pulled in operating revenue of $3.2 billion for the past three-month period, beating estimates by 4.8%. Although Dominion has boosted sales, it kept less than expected as profit. The company recently had some headline issues as a Virginia nuclear plant has fuel rod issues. Fortunately, everything was contained with no environmental damage. Many analysts on Wall Street actually think that the new EPA bill introduced earlier this year may actually provide a tailwind for this utility.
Dominion investors are paid a 3.43% dividend. The Thomson/First Call consensus price target for the stock is $72.14. Dominion closed Monday at $70.07 a share.
Occidental Petroleum Corp. (NYSE: OXY) announced it will continue to grow dividends and expects to begin buying back more shares in 2014 and beyond, a double plus for shareholders. The company finally rewarded activist investors earlier this year when it announced a spin-off of its California assets into a separate company. Occidental had faced calls from Wall Street and activist investors for years to split its U.S. business from its international operations, with analysts valuing the assets at a range of between $19 billion to $22 billion.
Shareholders in Occidental are paid a 3% dividend. The consensus price target for this top energy play is $110.50. The stock closed Monday at $97.08.
Northeast Utilities (NYSE: NU) raised its dividend 7% in February, and it is expected to continue to grow dividends between 6% and 8%. The company serves 3.6 million electric and natural gas customers in three New England states. The company notes that, “The region’s renewable and carbon mandates are not achievable under the current market framework.” That’s why it is building transmission lines to connect hydro-power in Canada to the northeast markets it serves, among other projects. The combination of transmission assets and renewable power will put Northeast Utilities in a solid position when it asks for rate hikes. Both tend to be viewed positively by regulators.
Investors are paid a 3.45% dividend. The consensus price objective for the stock is $47.46. Shares closed trading Monday at $45.55.
Emerson Electric Co. (NYSE: EMR) ranks right near the top of the highest yielding stocks in the Dividend Ruler portfolio. The large-cap blue-chip company is a global leader in bringing technology and engineering together to provide innovative solutions for customers in industrial, commercial and consumer markets around the world. The company is composed of five business segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Commercial & Residential Solutions. Sales in fiscal 2013 were $24.7 billion.
With solid dividend coverage, it is an ideal stock for long-term growth and income investors. Investors receive a 2.8% dividend. The consensus price target is $71.18, and shares ended Monday at $62.46.
British American Tobacco PLC (NYSE: BTI) announced earlier this year a 6% dividend increase. The company’s predictable cash flow translates into very consistent dividend growth. The stock got a nice lift after the merger of Lorillard and Reynolds was announced. Regulators have slowed the merger while reviewing antitrust issues, but in the end, most on Wall Street feel it will be completed.
Investors are paid an outstanding 4.30% dividend. The consensus price target for the European-based tobacco giant is $132. The shares closed trading on Monday at $114.46.
With the prospects for a positive fourth quarter and strength into 2015, more conservative investors may want to focus on these top growth and income stocks. They are lower beta than momentum stocks and consistently raise dividends to reward shareholders.