UBS's Highest Yielding Dividend Ruler Stocks With Solid Growth Prospects for 2015
One trend that has continued into 2015 has been the plunge in interest rates. With the 30-year U.S. Treasury bond yielding a paltry 2.9%, the slowest since July of 2012, income investors with an eye toward growth are in a bad spot. One terrific way to fight the low yield battle is to buy high-yielding stocks that also present growth potential. In a new report from UBS, the analysts make the first 2015 update to the Dividend Ruler stocks portfolio.
While there are no changes to the portfolio for January, lower stock prices since the rally of mid and late December have pushed up yields as stock prices have fallen. This gives investors a chance to snatch up the best yields from this outstanding portfolio. We screened the stocks for the highest yielding stocks currently.
Dominion Resources Inc. (NYSE: D) is expected to grow the company dividend 7% this year, in line with the last four. The company pulled in operating revenue of $3.2 billion for the most recent 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 some fuel rod issues. Fortunately, everything was contained with no environmental damage. Many analysts on Wall Street think that the EPA bill signed last year may actually provide a tailwind for this top utility.
Dominion investors are paid a 3.1% dividend. UBS has a $84 price target for the stock, and the Thomson/First Call consensus price target is $75.38. Dominion closed Monday at $76.50.
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 comprised of five business segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Commercial & Residential Solutions. With solid dividend coverage, it is an ideal stock for long-term growth and income investors.
Investors receive a 3.1% dividend. The UBS price target was unavailable. The consensus target is listed at $68.83. Shares closed Monday at $60.17.
Invesco Ltd. (NYSE: IVZ) is a financial services company that has strong positions in both equity exchange traded funds (ETFs) and actively managed equity and debt mutual funds. The company looks to be very well-positioned to capitalize on inflows into both segments, as well as higher asset prices, as many on Wall Street see a continuation of the almost six-year rally, albeit at a slower rate this year. Invesco reported preliminary month-end and year-end assets under management for 2014 of $792.4 billion, a decrease of 1.4% month over month.
Investors are paid a 2.7% dividend. The UBS price target is $42. The consensus target is a touch higher at $44.65. The shares closed Monday at $37.43.
Northeast Utilities (NYSE: NU) raised its dividend 7% last year and is expected to continue to grow dividends between 6% to 8% for shareholders in 2015 and beyond. The company, which recently changed names to Evercore Energy, serves 3.6 million electric and natural gas customers in three New England states. The company has noted 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 in 2015 and beyond. Both tend to be viewed positively by regulators.
Northeast investors are paid a 2.95% dividend. The UBS price target is set at $55, and the consensus target is $50.92. Shares closed Monday at $53.33.
Occidental Petroleum Corp. (NYSE: OXY) announced last year it will continue to grow dividends and expects to begin buying back more shares this year and beyond, a double plus for shareholders. The company finally rewarded activist investors in 2014 when it spun off 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. The spun-off California operations now trade as California Resources. Wall Street applauded the action, and the stock has held up better than most in the energy sector.
Occidental shareholders are paid a solid 3.75% dividend The UBS price target for this very defensive top energy play is $85. The consensus target is $90.66. The stock closed Monday at $74.95, down almost 4%.
Income investors with a eye toward the growth horizon have been hampered as low bond yields have driven more investors to higher yielding stocks. The market volatility and selling to start 2015 has brought some of these yields back to levels substantially above Treasury levels. While not as safe, they still make for solid long-term portfolio holdings for conservative investors.