Even though the market essentially has traded sideways in 2018, many would argue the overall market on a forward earnings basis is fully valued, and one of the few things helping to boost stocks higher is massive share repurchases from companies that have had cash windfalls from the new tax law. However, with yields still very low, the 30-year Treasury bond trades at a 3.06% yield, dividend-yielding total return stocks may be the way to play the rest of 2018.
We like to remind our readers about the impact total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%: 10% for the increase in stock price and 3% for the dividends paid.
We screened our 24/7 Wall St. research database and found five companies rated Buy at top Wall Street firms that pay at least a 5% dividend. All make good sense for growth and income accounts.
This company recently won its battle to acquire Time Warner and may become a much bigger entertainment player. AT&T Inc. (NYSE: T) is the largest U.S. telecom company by market capitalization. It provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections with 77 million postpaid subscribers.
AT&T is also the world’s largest provider of pay TV. The company has TV customers in the United States and 11 Latin American countries. The company helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions as well. With shares trading at a very cheap 9.4 times estimated 2018 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
The company reported better-than-expected second-quarter earnings updated 2018 earnings guidance to the “high end” of the prior range.
AT&T shareholders receive a rich 6.61% dividend. The analysts at Baird rate the stock Outperform and have a $38 price target. The Wall Street consensus target was last seen at $36.64, The shares traded early Thursday at $30.40.
This maker of tobacco products has been hit hard and offers value investors a great entry point now. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year treasury rate.
Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return plan. The analysts expect continued support of the strong dividend, in addition to continued share repurchase activity. The board also recently raised the dividend by 8.2%.
To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine and e-cigarettes. The company also holds a 10% stake in brewer Anheuser-Busch, the world’s largest brewer.
Altria investors are paid a 4.85% dividend. Merrill Lynch has a $70 price target, and the posted consensus estimate is $68.24. The stock traded at $56.85 Thursday morning.