5 Jefferies Franchise Picks Stocks With Huge Total Return Potential
March 9 will mark the 10-year anniversary of the bottom of the S&P 500 during the massive mortgage/housing bubble catastrophe and the beginning of the current, but somewhat tired, long-running bull market. With interest rates still at generational lows, it makes sense to continue to have stock market exposure, but caution is needed given the inflated valuation metrics. One solid way for investors to proceed now is to shoot for stocks that can provide total return.
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 the Jefferies Franchise Picks list, which is the firm’s top stocks to buy, for companies that pay dividends and found five that offer investors the potential for solid total return.
This stock had traded in a tight range but broke out big on earnings. Boeing Co. (NYSE: BA) is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined.
The different segments in the company are: Commercial Airplanes; Boeing Defense, Space & Security and Boeing Capital, which provides financial solutions facilitating sale and delivery of Boeing commercial and military aircraft, satellites, and launch vehicles.
Last year, Boeing and Embraer signed a nonbinding memorandum of understanding to create a new strategic partnership for commercial aviation. The new joint venture is valued at $4.75 billion, which values Boeing’s 80% share at $3.8 billion.
The company also posted incredible fourth-quarter result backed by its bullish delivery forecast. Boeing sees full-year earnings of $19.90 to $20.10 per share on revenue of $109.5 billion to $111.5 billion, well above the Wall Street consensus forecast. Full-year operating cash flow is seen at $17.0 billion to $17.5 billion, up from $15.32 billion in 2018.
Shareholders receive a 2% dividend. The Jefferies price objective for the shares is $448, and the Wall Street consensus target is $415.09. The stock ended Wednesday’s trading at $411.11.
This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.
With Permian production and asset disposals targets reset, the company can raise the dividend 20% and buy back 15% of shares. Many analysts view the strategy update as appropriately conservative for one of the more oil-levered majors. The Chevron strategy through 2020 is focused on discipline, enabled by step change in capital efficiency driven by doubling Permian production.
Fourth-quarter profit topped expectations as lower expenses offset a drop in earnings in Chevron’s main businesses. Earnings jumped 20% to $3.73 billion, or $1.95 a share, but the company generated $42.35 billion in revenue, compared with the $46.13 billion forecast by Wall Street.
Chevron shareholders receive a 4.02% dividend. Jefferies has a $147 price target, and the consensus target is $138.54. Shares closed at $118.88 on Wednesday.