It became clear earlier this month that interest rates are going nowhere for the rest of this year, and they may not go anywhere in 2020. The Federal Reserve is worried about slowing growth, and with inflation seemingly contained, the all-new dovish Fed Chair Jay Powell has lowered the federal funds rate twice in the past 90 days, as well as ended the balance sheet cleanup. Worried investors continue to pile into Treasury bonds, keeping most yields near generational lows.
So what should investors do now? More aggressive growth and income accounts can look for stocks that, for whatever reason, have been hit but still offer serious dividends. We screened our 24/7 equity research database looking for just those kind of companies and found four that fit the bill perfectly. All have a Buy rating with at least one major Wall Street firm.
This maker of tobacco products offers value investors a great entry point now, and it took a hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro, one of the most valuable brands in the world.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs. The company also has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
Altria shareholders receive a massive 8.28% dividend. Merrill Lynch has a Buy rating with a $54 price target, just shy of the Wall Street consensus target of $54.71. The stock closed Wednesday at $40.56.
This remains a very attractive way for investors to be in the financial services and money management arena. Invesco Ltd. (NYSE: IVZ) is one of the world’s largest independent asset management groups, with over 750 investment professionals worldwide and a presence in over 20 countries. It offers a range of investment styles and products to institutions and individuals through a variety of distribution channels around the world.
The company reported second-quarter earnings with revenues up quarter over quarter and year over year. Ending assets under management of $1.2 trillion included $224.4 billion from the Oppenheimer Funds acquisition. The company also noted that the Oppenheimer Funds integration is on track to deliver expected benefits and $475 million in net cost synergies.
Invesco offers investors a 7.32% dividend. RBC remains bullish and has a $26 price target. The consensus target is $21.07, and shares closed at $16.95 on Wednesday.
This top real estate play also comes in with a huge dividend. Macerich Co. (NYSE: MAC) is a fully-integrated, self-managed, and self-administered real estate investment trust that focuses on the acquisition, leasing, management and development of regional malls throughout the United States. Macerich owns 55 million square feet of real estate, with interests in 51 regional shopping centers.
The company reported better than expected second-quarter funds from operation (FFO) per share, and management maintained its annual FFO guidance. The company also recaptured 10 Sears locations through formal lease rejections and lease terminations.
Investors receive a 9.36% distribution. The Buy rating at Evercore ISI comes with a $43 price target. The consensus target is $38.42, and shares were last seen trading at $32.05.
This company made huge news with a Warren Buffett backed purchase of Anadarko Petroleum. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals.
The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. Meanwhile, the chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
With the company’s rock solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.
The shares have underperformed since the Anadarko acquisition was announced, but the investment case anchored by yield has not changed. Further, the company’s bid, while higher than Chevron’s, stands to release substantially more value via asset sales and synergies.
Shareholders receive a 7.00% dividend. The gigantic $80 Merrill Lynch price target Buy-rated stock compares with a $56.63 consensus target and the most recent close at $44.04.
Investors should note that any of these four companies could at some point lower or even eliminate their respective dividends. In the case of Occidental and Altria, which have paid consistent dividends for decades, that seems very unlikely at this point.