Investors and strategists on Wall Street could see it coming once the market blew up back in February and March. Many companies were forced to eliminate or suspend their dividends as the novel coronavirus swept the country and brought the economy to a standstill. Energy companies, banks, airlines and others that had paid dependable dividends to investors for years had to halt payments to help preserve liquidity, and total return and income investors got hit.
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A massive new report from Jefferies global head of micro-strategy, Desh Peramunetillke, and his team noted that with the world entering another deflationary and low-growth cycle, the hunt for yield is set to revive. In this annual edition of the Jefferies Dividend Playbook, he focused on the changing income landscape amid COVID-19-induced uncertainty and dividend cuts and provided a framework for capturing “rock-solid dividends.”
This was noted in the report:
Investing in high dividend yield stocks has been a rewarding strategy for long-term investors. To capture the full spectrum of income opportunities, we highlight numerous dividend strategies including bond-proxies, growth at a reasonable yield (GARY) and dividend growers. However, with COVID-19 impacting dividend stocks across strategies, we have introduced a new systematic “rock-solid” dividend framework that aims to focus on yield stocks with sustainable dividends. This new strategy has worked across the cycle and has outperformed all dividend strategies over the long term.
Five top stocks are featured in the USA rock-solid dividend portfolio, and all make sense for total return and income investors looking for dependable dividend payers.
Cisco
This is a mega cap tech leader for more conservative accounts to consider. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Cisco cybersecurity products give clients the scope, scale and capabilities to keep up with the complexity and volume of threats. Putting security above everything helps corporations innovate while keeping their assets safe.
Shareholders receive a 3.18% dividend. The Jefferies target price for the shares is $49, and the Wall Street consensus target is $48.81. Cisco Systems stock closed Friday’s trading at $45.32 a share.
Eastman Chemical
This stock has rallied smartly off the March lows and is another safe-haven for conservative accounts. Eastman Chemical Co. (NYSE: EMN) engages in the provision of specialty chemicals. It operates through the following segments.
The Additives and Functional Products segment includes chemicals for products in the transportation, consumables, building and construction, animal nutrition, crop protection, energy, personal and home care, and other markets. The Fiber segment offers cellulose acetate tow for use in filtration media, primarily cigarette filters.
The Advanced Materials segment of Eastman Chemical produces and markets its polymers, films and plastics with differentiated performance properties for value-added end uses in transportation, consumables, building and construction, durable goods, and health and wellness markets.
The Chemical Intermediates segment consists of large scale and vertical integration from the cellulose and acetyl, olefins and alkylamines streams to support operating segments with advantaged cost positions.
Investors receive a 3.80% dividend, and Jefferies has a $77 price objective. The posted consensus target price is $72. Eastman Chemical stock was last seen trading at $69.49.
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