After a year in which we saw just about everything, one sector continued to dominate, and that was technology. So the question remains whether to stay with big tech again, or is there a change coming? Many across Wall Street are fading tech some and looking at cyclical, value stocks, industrials and more. While positive earnings could continue to drive the major indexes higher in 2021, a very overbought and fully valued market could offer some painful January indigestion.
24/7 Wall St. decided to screen the 30 stocks in the venerable Dow Jones industrial average looking for companies that paid solid dividends and could offer investors perhaps a smoother ride in 2021. We also looked for sectors and companies that could see some rotation next year. We found five stocks that look like solid total return ideas with upside and reliable dividends.
All five are rated Buy at major Wall Street firms we cover, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This large cap leader was hit by trade worries in 2019, but has rallied nicely this year off the March lows. Caterpillar Inc. (NYSE: CAT) is the world’s largest manufacturer/marketer of construction equipment and is also a leading manufacturer of diesel engines and turbines for transport and industrial applications. It is also one of the most valuable brands in the world.
The company principally operates through three primary segments (Construction Industries, Resource Industries and Energy & Transportation). It also provides financing and related services through its Financial Products segment.
Goldman Sachs said this after the quarterly results were released:
Following Caterpillar’s mixed third quarter results, we raise our 2020-22 EPS by 4% on average as stronger Construction Industries sales forecasts are partly offset by lower Energy & Transportation margin forecasts. On the positive side, the quarter revealed a backlog inflection in Construction Industries, inventory destock approaching historical trough , a sequential improvement in pricing driving a 1% margin beat versus our estimate. Beyond the quarter, momentum is building for the company’s autonomous mining trucks (comments imply 60 units delivered in 4Q), and we note that Caterpillar has commercial hydrogen-powered turbines, positioning the company to participate in a hydrogen infrastructure investment cycle if adoption of hydrogen emerges.
Shareholders receive a 2.61% dividend. The Goldman Sachs price target for the shares is $192, and the Wall Street consensus target is $173.75. Caterpillar stock closed most recently at $179.56 a share.