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.
AT&T
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.
Altria
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.
24/7 Wall St.Enterprise Products Partners
This is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, natural gas liquids fractionation, import and export terminaling, and offshore production platform services.
One reason why many analysts may like the stock might be its distribution coverage ratio. That ratio is well above one-times, making it relatively less risky in its sector. The company’s distributions have grown for several quarters, and last year Enterprise Products announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.4275 per common unit, or $1.71 per unit on an annualized basis.
Investors are paid a 5.79% distribution. RBC analysts rate the shares at Outperform with a $34 price target. That compares with the consensus price target of $32.23 and the recent share price of $29.35.
Ford
This is a solid value play now. Ford Motor Co. (NYSE: F) is one of the world’s largest vehicle producers, with over 6 million units manufactured/sold globally. The company has made significant progress executing on its One Ford plan and delivering best-in-class vehicles. It also remains committed to positioning itself well within the evolving auto industry through balanced investments across electrification, autonomy and mobility services.
The company reported disappointing results for the most recent quarter and the shares trading down on the results Thursday morning. Investors may want to wait until the selling settles out to buy. The second half of the year is expected to be decidedly better.
Shareholders receive a 5.84% dividend. Jefferies recently upgraded the stock to Buy with a $14 price target, and the consensus target is $12.12. The shares were trading at $10.10.
GlaxoSmithKline
This top global pharmaceutical could offer outstanding total return for investors as a solid portfolio holding. GlaxoSmithKline PLC (NYSE: GSK) offers pharmaceutical products in the therapeutic areas, including respiratory, antivirals, central nervous system, cardiovascular and urogenital, metabolic, antibacterials and emesis, dermatology, rare diseases, immuno-inflammation, vaccines and HIV. It also provides consumer health care products in wellness, oral health, nutrition and skin health areas.
The company has three divisions: Prescription Medicines (includes ViiV HIV joint venture with Pfizer and Shionogi), Consumer Health and Vaccines. In prescription drugs, its key franchises include Advair (asthma/COPD), HIV and other antiviral drugs.
The company posted solid second-quarter results and is a safe way to play the global pharmaceutical sector.
GlaxoSmithKline investors are paid a 5.31% dividend. The Cowen price target for the Buy-rated stock is $47, while the consensus target is $42.13. The shares traded at $40.15.
Nothing exciting here, and that’s exactly the point. With low volatility ratings, big dividends and some growth potential, these stocks are ideal for investors who want to own stocks that they can put in their portfolio and forget about.
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