The song remains the same, and it will for the foreseeable future. The Federal Reserve probably will not be raising rates until 2023, so we remain in a setting with coupons on government securities still close to generational lows. Certificates of deposits at banks are wretched, with the best five-year rate we could find at a paltry 1.25%. Quality investment-grade corporate and municipal bonds? Same story.
So what are balanced growth and income investors to do? The potential for capital appreciation on low coupon bonds is negligible, and with the market possibly primed for a big sell-off, risking high-yield or leveraged funds doesn’t make any sense for those with low risk tolerance. What does make sense is quality stocks that pay at least a 4% dividend and have somewhat limited downside risk for solid total return.
We screened our 24/7 Wall St. research database looking for companies that are rated Buy, have a 4% or higher dividend and offer investors a degree of relative safety. While we found five outstanding ideas, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This energy giant is a safer way for investors looking to be positioned in its sector, and it is the top energy sector pick for 2021 at BofA Securities. 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.
Back in December, the company gave some solid 2021 guidance, and the analyst noted this at the time:
Chevron provided guidance around capital expenditures through 2025. On a headline basis, the company expects to spend $14 billion in 2021 ($9.7 billion in cash capital expenditures), and $14-$16 billion annually in 2022-2025 relative to Chevron’s prior out year guidance of $19-22 billion, which excluded the Noble transaction. The company remains focused on investments in the Permian, other unconventionals, and the Gulf of Mexico.
Shareholders receive a 5.80% dividend, which the analysts feel comfortable will remain at current levels. The BofA Securities price target for shares is $115, which is higher than the $103.44 consensus target across Wall Street. The last Chevron stock trade for Wednesday was reported at $88.96 a share.