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Jefferies Adds Top Financial Stock to Franchise Picks Portfolio

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With earnings for the third quarter more than half over, and the fourth quarter of 2016 in full swing, many of the top companies we follow on Wall Street are making some changes to the lists of their high conviction stock picks for clients. With the market continuing to trade to near all-time highs, it makes sense to examine these lists and make some changes as the rest of the year could have additional volatility due to the political cycle.

The analysts at Jefferies have made a big move by adding KeyCorp. (NYSE: KEY), a top financial company, to the firm’s well-respected Franchise Picks list of stocks to Buy.

This is a smaller large cap bank that makes good sense now, and it makes its debut on the Franchise Picks list. It operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses. The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.

Jefferies likes the larger regional banks, noting that valuations look very reasonable and cost saving plans are helping to make forward estimates look very achievable. With overall credit remaining solid, earnings and loan, deposit and fee growth all are positive metrics for the bank.

Investors are paid a nice 2.38% dividend. The Jefferies price target for the stock is $16, and the Wall Street consensus target price is at $14.62. The stock closed Thursday at $14.27 per share.

In addition, here are the three top-yielding dividend stocks in the Franchise List portfolio.

AbbVie

This stock is one of the top global pharmaceutical stocks picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company’s mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. AbbVie employs more than 26,000 people worldwide and markets medicines in more than 170 countries.

One of the biggest concerns with AbbVie is what eventually might happen with anti-inflammatory therapy Humira, which generated $14 billion in sales in fiscal 2015. That was the most any drug has recorded during a single year and represents a gigantic part of the company’s overall earnings. The problem is that biosimilars and generics are itching to enter the market with Amgen leading the charge, and some Wall Street analysts project that AbbVie may have a difficult time stopping that trend.

Back in May, the patent board instituted Coherus BioSciences’ Inter Partes Review against the Humira ‘135 patent. The outcome of the review is expected in 12 months. While most analysts remain positive on Humira duration, the expected litigation uncertainty could continue to create an overhang on the stock, which does give investors chances to pick up shares lower.

AbbVie investors are paid an outstanding 3.71% dividend. Jefferies has a $90 price target for the stock, and the consensus price target is posted at $71.21 Shares closed Thursday at $61.46 but were down big Friday morning after the company released third-quarter results that were less than stellar.

Boeing

This top aerospace industrial is still down almost 8% since the beginning of the year, and it was removed from the Dividend Ruler portfolio. 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.

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 their 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 that are Boeing’s big customers.

Boeing investors are paid a very solid 3.04% dividend. The Jefferies price target is set at $165. The consensus price target is $148.71. The shares closed trading on Thursday at $143.31 apiece.

Ingersoll-Rand

This is one of the many top companies that have restructured and are now based in Ireland. Ingersoll-Rand PLC (NYSE: IR) is another top industrial stock to buy and, with the housing market continuing to grow, the company’s wide range of portfolio products should continue to sell well. Many on Wall Street also see the stock as a good play on the replacement, upgrade and, ultimately, growth in the commercial and residential air conditioning markets. Trends in these markets have been highly correlated with overall commercial construction and are thus earlier in the cycle.

Ingersoll Rand has an outstanding portfolio of global brands and holds leading market share in all major product lines. The geographic and industrial diversity coupled with a large installed product base provides solid growth opportunities for the company within service, spare parts and replacement revenue streams.

Ingersoll-Rand investors are paid a 2.4% dividend. The Jefferies price objective is set at $75, and consensus price target is posted at $74.68. Shares closed on Thursday at $67.04.

Four companies in four very different sectors that all offer liquidity, a degree of safety and solid dividends that should continue to rise. All are trading below 52-week highs and look like good additions to long-term growth portfolios.

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