Jefferies Makes Major Change to Franchise Picks Stock Portfolio

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Boeing

This top aerospace industrial is still down over 10% since the beginning of the year. Boeing Co. (NYSE: BA), together with its subsidiaries, designs, develops, manufactures, sells, services and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services worldwide. The company operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support and Boeing Capital.

Top Wall Street analysts have increased confidence in continuing good demand, and they note that the company has made announcements in the past that support the thesis that the productivity and margins will continue to improve. 787 execution is good as the company works through the backlog, and cash flow looks to be strong with 787 deliveries and C-17 orders. Some Wall Street analysts also point to continued lower oil prices as a bullish indicator for the top carriers who are Boeing’s big customers.

Boeing investors are paid a 3.36% dividend. The $165 Jefferies price target is well above the consensus target of $148.28 and the most recent close at $129.69.

WestRock

Last summer saw the merger of two top packaging and container companies, and that could provide an outstanding opportunity for investors, as the stock has been absolutely mauled since the merger. WestRock Co. (NYSE: WRK) is the completed and merged entity that combined old Rock-Tenn and MeadWestvaco.

WestRock has become the second-largest U.S. packaging company, valued at $10.7 billion, trailing only International Paper and its market capitalization of just under $15 billion. WestRock is expected to generate net sales of $15.7 billion and adjusted EBITDA of $2.9 billion. This includes the impact of $300 million in estimated annual synergies, to be achieved over three years.

Jefferies notes that the company announced a stock repurchase program last year of 40 million shares, which is equal to 15% of the shares outstanding. It also announced a very generous 17% increase in the company dividend. The current dividend will be $1.50 per share, or $0.375 per quarter.

WestRock trades with a more than 10% free-cash-flow yield, and owing to demand resiliency and lower spending, the Jefferies team believes cash flow can hold up even in a tougher economic environment. They also think that the stock could continue its march off lows printed back in February if container-board prices hold, which they have for the second month in a row.

WestRock investors will receive a very tempting 3.84% dividend. Jefferies has a $56 price target, but note that the consensus target is set at $70.56. Shares closed most recently at $39.05.

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While it looks like the stress from the Brexit vote is over for the time being, other factors like the political conventions could ratchet volatility right back up. Solid dividend-paying stocks make sense for the rest of this year.