With interest rates backing up on the strong employment reading last Friday, the Wall Street strategists handicapping the timing of when the Federal Reserve will start to raise interest rates have started to talk summertime again. Despite the inevitability of the move, and past week’s increase, interest rates remain mired at all-time lows, which has proven difficult for income investors. A new research report from UBS points out that five Dividend Ruler stocks list members have already announced 2015 dividend increases since the last monthly report.
With dividend-paying stocks one of the best ways to generate income without horrible credit risk, we closely watch the UBS Dividend Ruler list for changes, both additions and deletions. This month Crane Co. (NYSE: CR) is added to the list, and Swiss pharmaceutical giant Roche Holding is removed.
We screened the list for five of the current highest yielding companies.
Intel Corp. (NASDAQ: INTC) recently introduced the company’s fifth generation processor and the chip giant’s commitment to smartphone and mobile applications, combined with the resurgence of PC growth last year made it one of the best large cap value stocks to buy in 2014, and the same outlook can possibly drive the stock this year. Intel trades at less than 15 times forward earnings, a very reasonable multiple for investors looking for growth. The UBS team points out that recent System-on-Chip (SoC) development issues it has experienced were largely execution related and they believe, after some changes, that is behind the company. They also continue to see upside potential in the chip giant’s shares driven by the combination of a now stable PC market, strong growth in DCG, improved profitability in mobile and a very large share repurchase plan.
Intel shareholders are paid a very solid 2.9% dividend. UBS has a $41 price target, while the Thomson/First Call consensus target is $37.17. Intel closed Friday at $33.29 a share.
Microsoft Corp. (NASDAQ: MSFT) disappointed on earnings and was sold off pretty hard in the middle of January, and we have seen insiders recently start to acquire stock at current levels. After an outstanding year in 2014, this sell-off in the stock gives investors a much better entry point into the venerable software giant. The company recently announced plans to start selling mobile phones and tablet computers in Africa that run on the company’s operating systems to tap surging demand for smart handsets on the continent. With potential to beat what was perceived by Wall Street as somewhat disappointing guidance, income investors may want to buy stock now as Microsoft goes ex-dividend next week on the 17th.
Microsoft shareholders are paid a 2.9% dividend. The UBS price target is $52, and the consensus target is $47.97. Shares closed Friday at $42.41.
Northeast Utilities (NYSE: NU) is one company on the list that has increased the payouts to shareholders. The utility approved a quarterly dividend of $0.4175 per share, payable on March 31, 2015, to shareholders of record as of the close of business on March 2. That represents a 6.4% increase for shareholders and is in line with last year’s increase. The company, now known as Evercore Energy, 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 is 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.
Northeast investors are paid a 3.1% dividend after the recent increase. The UBS price target is $55, and the consensus target is $53.62. Shares closed Friday at $53.71.
Occidental Petroleum Corp. (NYSE: OXY) is a top oil stock to buy and is on the screen at many of the Wall Street firms we cover as a solid bounce-back candidate. The company announced last year it will continue to grow dividends and it expects to begin buying back more shares this year and beyond, a double plus for shareholders. Analysts feel that the company faces the oil price correction with the strongest balance sheet in the sector, with net cash at year-end 2014 they estimate at around $1.7 billion, and a whopping $11 per share of cash available for buybacks. With chemicals and other products helping to blunt the drop in oil, Occidental is well positioned to ride out the storm.
Occidental shareholders are paid a solid 3.5% dividend. UBS has a price target of $92, and the consensus target is $84.87. The stock closed Friday at $81.75.
Toronto-Dominion Bank (NYSE: TD) is based in Canada and is a stock that the UBS team is very bullish on. TD Bank is one of the 10 largest banks in the United States, providing more than 8 million customers with a full range of retail, small business and commercial banking products and services at approximately 1,300 locations throughout the Northeast, Mid-Atlantic, Metro D.C., the Carolinas and Florida. The bank has continued an aggressive U.S. expansion plan that the UBS team sees as a strong adjunct to the Canadian business.
Investors are paid a very solid 3.7% dividend. While the UBS price target is $58, the consensus target is set at $62.11. Shares closed trading on Friday at $43.29.
With the stock market, especially the U.S. market, probably the best place for investors this year, these top stocks will provide investors income and potential growth, while not having the volatility of many momentum growth stocks. Again, with interest rate increases still a jump-ball, but summer perhaps the best bet, owning stocks that regularly raise dividends makes sense.