With interest rates plunging, many investors that used to use money markets in their portfolios for cash, safety and yield have been put in a very bad position. In an attempt to ignite growth, central banks have pushed yields down to all-time lows, forcing investors to look for yield in equities. The two top performing sectors this year are telecommunications and utilities, both of which are now severely overbought, the question is where to look now.
One of the best places we know is the UBS Dividend Rulers portfolio. The analysts focus on stocks with solid dividends that have consistently grown over time, and their performance this year is outstanding. Through the first half, the portfolio is up 7.1% on a total return basis, versus just 3.84% for the S&P 500.
We focused on some of the stocks that underperformed that may be top contrarian buys now. They also are the highest yielding stocks in the group.
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 very solid 3.45% dividend. The Thomson/First Call consensus price target for the stock is $148.28. The shares closed trading on Wednesday at $126.96.
This leader in semiconductors is working hard to scale away from dependence on personal computers. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide. The company’s platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
The company also provides communication and connectivity offerings, such as baseband processors, radio frequency transceivers and power management integrated circuits, and tablet, phone and Internet of Things solutions, which include multimode 4G LTE modems, Bluetooth technology and GPS receivers, software solutions and interoperability tests, as well as home gateway and set-top box components.
Intel reported an inline first quarter, and lowered the forward outlook. Merrill Lynch stays positive on the company and believes there is solid upside potential for the stock. Some analysts think the restructuring can ultimately translate to $0.23 in annual earnings-per-share savings.
Intel investors are paid a very solid 3.15% dividend. The consensus price target is $35.20, and shares closed most recently at $32.97.