With 2015 off to a rough start, many equity investors may still be trying to decide how to shape and design their portfolio after a strong, almost six-year rally. One solid way to proceed is to buy blue chip growth stocks that pay a dividend. With the long Treasury yield at lows not seen since the summer of 2012, many top stocks easily provide a better risk-reward scenario than low-yielding government debt. A new resort from UBS highlights the firm’s first Equity Focus list for 2015.
While there were no major changes to the first list for 2015, the large market sell-off has provided a very nice entry point for total return investors to buy top stocks at prices that are much better than even a short month ago. Here are five of the highest yielding dividend stocks in the UBS Equity Focus list for January.
Colgate-Palmolive Co. (NYSE: CL) is a top consumer staples name on the list, and it was added to the firm’s high conviction call list in the fall of last year. Colgate sells its products in more than 200 countries and makes more than 75% of its revenue outside the United States, which provides the company geographic diversification and growth opportunities in emerging markets. This diversity, matched with a huge list of consumer products, keeps revenues and dividends growing.
Colgate-Palmolive investors are paid a 2.1% dividend. The UBS price target for the stock is $74, and consensus target is $69.95. Colgate closed Monday at $68.53 a share.
Emerson Electric Co. (NYSE: EMR) is another top stock to buy, one that the UBS analysts feel will be a beneficiary of the expected upturn in capital spending in 2015. The company boasts a solid balance sheet, with a tiny 0.5 debt-to-equity ratio. Plus the dividend is well covered and was recently increased. UBS also notes that, while the stock was a mediocre performer in 2014, the underperformance could attract shareholder activists. In addition, with its strong balance sheet and its strong free cash flow, company management could begin a leveraged share repurchase program of as much as 10% of its shares outstanding at current prices. That could be a huge boost for current and new shareholders.
Emerson investors receive a 3.1% dividend. The UBS target is $72, and the consensus target is $68.83. Emerson closed Monday at $60.52.
Macy’s Inc. (NYSE: M) is a top retail name in the general merchandise area at UBS. Analysts at numerous Wall Street firms have applauded the great strides the company is making in improving its online sales ability. The renewed online effort helped to boost what was a very solid showing for the recent holiday season. The UBS analysts also feel that the company’s mid-teens earnings-per-share growth profile over the next several years is achievable, driven by low-single-digit same-store sales growth, the solid e-commerce moves and improvements in store productivity.
Macy’s investors are paid a 2.1% dividend. The UBS price target is $67, and the consensus target is lower at $65.64. The stock closed Monday at $65.13.
Merck & Co. Inc. (NYSE: MRK) is a top pharmaceutical pick at UBS for 2015. The company has enjoyed a solid 2014 for investors, up over 15%. It also remains a leading health care company and is on the focus lists of many of the top firms we cover. The company’s numerous prescription medicines, vaccines, biologic therapies and consumer care and animal health products are provided to customers in more than 140 countries. Many Wall Street analysts feel that company’s purchase of Idenix last summer for $3.85 billion to acquire its hepatitis C pipeline could pay off huge for investors in the future.
The company pays shareholders a very solid 3.1% dividend. The UBS price target is $64. The consensus target is right in line at $63.94. Merck closed Monday at $58.04.
Microsoft Corp. (NASDAQ: MSFT) is a top large cap technology stock rated Outperform at UBS. It offers investors solid growth and income. While posting strong earnings for the third quarter, and with analysts very positive for upcoming fourth-quarter results, the software giant could provide investors with another strong year. Microsoft announced huge layoffs of as many as 17,000 employees in 2014 as a result of the Nokia handset purchase, and it continues to wring costs out of the system. UBS sees Microsoft continuing to evolve away from its core Office suite of products and focusing on multiple areas of growth and new products, many of which are expected to debut in 2015.
Microsoft investors are paid a respectable 2.7% dividend. The UBS price target is at $52, and the consensus target is $49.84. Microsoft closed Monday at $48.70 a share.
With 2015 off to a rocky start, and a fair amount of concern over the plummeting price of oil and oil stocks, more conservative growth investors may want to steer to the dividend leaders on the UBS Equity Focus list.
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