As investors and traders have returned from the Fourth of July holiday weekend and started to focus on second-quarter earnings, many of the Wall Street firms that we cover are tweaking some of their importance client stock lists. A new report from UBS makes changes to the firm’s Dividend Ruler stock list.
Given the current turmoil in the markets and the expected ongoing fallout from the Greek crisis, investors would be wise to play it safe for a while and avoid high beta momentum stocks. The UBS Dividend Ruler list is full of high-quality large-cap stocks that should weather any downturn better.
In the July research report, the UBS team adds Johnson Controls Inc. (NYSE: JCI) to the list. The company is a leading provider of HVAC (heating, ventilation and air conditioning) products and services for commercial buildings and batteries for automotive markets. Recently, the company announced plans to divest its automotive seating business.
The UBS team expects the company to benefit from an improvement in the U.S. commercial construction market, as well as technology transitions in the battery marketplace. Shares closed Monday at $50.54.
Eversource Energy (NYSE: ES) is a utility stock that is removed from the list.
In addition to these changes, we screened this list for the stocks that are currently the highest yielding. Here are the four current highest yielding stocks to buy on the Dividend Ruler list.
Many of the Wall Street firms that we cover are becoming more positive on utilities. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and serves utility and retail energy customers in 13 states.
Dominion Resources has a series of solid growth-oriented projects in its pipeline, which include combined-cycle facilities in Brunswick and Greensville Counties, Va. The company is also heavily investing in midstream assets such as Cove Point Liquefaction and Atlantic Coast Pipeline projects, which could provide solid returns once they come on line.
Dominion Resources investors are paid a solid 3.81% dividend. The UBS price target for the stock is $79, and the Thomson/First Call consensus target is $79.31. The stock closed Monday at $67.85.
This top chip company has been in the doghouse on Wall Street all year, and the recent earnings implosion at Micron Technology did not help. Intel Corp. (NASDAQ: INTC) has among the highest shareholders cash returns at approximately 8%, but it has lagged high-growth specialty chip stocks. The iconic chip giant had a stellar 2014 on the tailwind from continued personal computer (PC) and notebook sales, but this year has been a far different story. The stock is down a gigantic 15.8% year to date.
Many on Wall Street are holding their collective breath in front of the company’s second-quarter earnings report. In an effort to increase and expand the company’s product line, Intel purchased chip rival Altera for a massive $16.8 billion. Some on Wall Street view the deal pessimistically, citing its high cost, aggressive growth assumptions on the part of Intel, and the increase in debt. Others feel the addition will help Intel start to move away from the PC and laptop dependence.
Intel investors are paid an outstanding 3.14% dividend. The UBS price target is $36.50, and the consensus target is posted at $34.37. Shares closed Monday at $30.04.
Johnson & Johnson
This larger pharmaceutical conglomerate is another yield leader on the UBS list. Johnson & Johnson (NYSE: JNJ) is one the top market cap stocks in the health care sector and will raise the dividend for shareholders this year for the 52nd consecutive year. With everything from medical devices to over the counter health items and prescription drugs, Johnson & Johnson remains one of the most diversified health care names on Wall Street.
The health care giant also has one of the most exciting pipelines of new drugs in the sector. That combined with the solid over-the-counter product business make the stock an outstanding holding. With branded pharmaceuticals leading the sales growth for the company, investors will be watching closely for overall sales growth in the second quarter.
Johnson & Johnson investors are paid a 3.05% dividend. The UBS target was unavailable, but the consensus target is $109.59. Shares closed Monday at $98.20.
This is another top company that comes in as a high-yielding domestic stock in the energy sector. 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. Analysts feel that the company still faces the rebounding oil price correction with the strongest balance sheet in the sector, with net cash at year-end 2014 estimated 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 continue to ride out the storm.
After the spin-off of California Resources last year, which some have recently been aggressively selling short, many on Wall Street that champion the stock feel that the overall corporate portfolio is much more streamlined. In addition, Occidental’s lower-than-average leverage gives it the flexibility to return cash to shareholders at a “best in class” rate. Some Wall Street analysts think that the company could be a buyer of Permian Basin assets in the second half of 2015.
This is also another energy company taking advantage of huge oil services cost savings. In fact, capital expenditures are expected to fall from $1.7 billion to $1.0 billion by the end of the year.
Occidental shareholders are paid an outstanding 3.96% dividend. The $84 UBS price target is less than the consensus target of $86.13. The stock closed on Monday at $73.90.
With the Greek debacle throwing some very cold water on the market, it makes sense for investors to use cash wisely and scale into these stocks. All should outperform, even in a correction or sell-off, and ultimately will reward patient long-term investors.
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