After years of a low interest rate environment, many investors have turned to equities, not only for the growth potential but also for solid and dependable dividends that help to provide an income stream. What this equates to is total return, which is one of the most powerful investment strategies going. While interest rates are rising, these companies still make sense for investors looking for solid growth and income potential.
We like to remind 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%. That is, 10% for the increase in stock price and 3% for the dividends paid.
Six top large-cap companies that are Wall Street favorites are expected to raise their dividends this week. While it is always possible that not all of them do indeed raise their dividends, top analysts expect them to, and those expectations are based on past increases in the firm’s dividend payouts.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Apple
This legacy technology leader makes up a stunning 40% of the Berkshire Hathaway portfolio, and it is set to report earnings this week. Apple Inc. (NASDAQ: AAPL) designs, manufactures and markets consumer electronics and computers, and it has developed its own proprietary iOS and Mac OS X operating systems and related software platform/ecosystem.
Revenues are principally derived from the iPhone line of smartphones, the Macintosh family of notebook and desktop computers, iPad tablets, iPod portable digital music players, and the Apple Watch. The company also realizes revenue from software, peripherals, digital media and services. The technology giant has consistently churned out new products that the public loves, and an inexpensive iPhone is one of the newest offerings.
Apple stock investors currently receive a dividend of 0.54%. The company is expected to raise the dividend to $0.24 per share from $0.22. J.P. Morgan has an Outperform rating and a $210 price target. The consensus price target is $193.28, and the stock closed trading on Friday at $161.79, down almost 3% for the day.
Exxon Mobil
Despite the recent rally in oil, this mega-cap energy leader trades below levels posted in 2018 and still offers investors an excellent entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
BofA analysts recently noted that the company’s latest 8-K points to another sequential earnings jump in the first quarter ($2.18 per share versus the prior $2.15) on better upstream profitability. First-quarter cash flow estimate now stands at $15.3b billion, versus the prior $14. billion, with organic free cash flow in excess of $10.5 billion, which is the highest since the third quarter of 2008. They also feel that with debt targets reached, buybacks are set to accelerate alongside peer-leading (and visible) free-cash-flow growth.
Shareholders currently receive a 4.13% dividend. The company is expected to lift the dividend to $0.92 a share from $0.88. The BofA Securities price target on Exxon Mobil stock is $120. The consensus target of $92.47 is closer to Friday’s close at $87.03 per share.
Marathon Petroleum
This is a solid way for more conservative investors to play the energy sector. Marathon Oil Corp. (NYSE: MRO) is one of the largest independent petroleum refining and marketing companies in the United States. Until recently, the company operated retail sites under the Marathon and Speedway brands. In addition, Marathon Petroleum operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.
The company sold the Speedway convenience stores to 7-Eleven in a $21 billion deal that closed last May. Activist investors had persuaded Marathon’s directors to reorganize the company.
Investors currently receive a 1.12% dividend. That dividend is expected to rise to $0.08 a share from $0.07. Along with its Buy rating, Truist Securities has the highest target price on Wall Street. That $41 is well above the $29.41 consensus target on Marathon Petroleum stock. The closing share price on Friday was $25.00, which was down 4% for the day.
Parker-Hannifin
This top industrial company looks poised for a solid 2022. Parker-Hannifin Inc. (NYSE: PH) manufactures and sells motion and control technologies and systems for various mobile, industrial and aerospace markets worldwide.
The Diversified Industrial segment provides pneumatic, fluidic and electromechanical components and systems, as well as filters, systems and diagnostics solutions to monitor and remove contaminants from fuel, air, oil, water and other liquids and gases.
The Aerospace Systems segment offers flight control, hydraulic, fuel, fluid conveyance and engine systems and components for commercial and military airframe and engine programs. It also provides electronics thermal management heat rejection systems and single-phase and two-phase heat collection systems for radar, inverse synthetic aperture radar and power electronics.
Shareholders receive a 1.50% dividend. The company is expected to raise the $1.03 per share dividend all the way to $1.37. The $350 Jefferies price target on the Buy-rated stock is less than the $358.71 consensus target. Parker-Hannifin stock closed nearly 4% lower on Friday at $277.07.
PepsiCo
This top consumer staples provider soon will be supplying the goods for summer picnics. PepsiCo Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay’s and Ruffles potato chips; Doritos, Tostitos and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips and Fritos corn chips.
The Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola and oat squares, as well as the recently name-changed Aunt Jemima mixes and syrups, and Quaker Chewy granola bars, Cap’n Crunch cereal, Life cereal and Rice-A-Roni side dishes.
PepsiCo’s North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Tropicana Pure Premium, Sierra Mist and Mug brands, as well as ready-to-drink tea and coffee, and juices.
Shareholders currently receive a 2.50% dividend. A dividend increase to $1.15 a share from $1.075 is projected. Morgan Stanley has set an Overweight rating on PepsiCo stock. The firm’s $188 price target compares with a $180.05 consensus target and Friday’s close at $172.15.
24/7 Wall St.Raytheon Technologies
This company has a diversified mix of business and makes sense for investors with war raging in Eastern Europe. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.
With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries. In 2020, United Technologies and Raytheon agreed to merge their businesses to create this new aerospace and defense powerhouse.
Investors now receive a dividend of 2.03%. The expected dividend hike is to $0.545 per share from $0.515. Morgan Stanley’s Overweight rating is accompanied by a $124 target price. Raytheon Technologies stock has a consensus target of $111.89. The stock closed at $100.49 on Friday.
These six top blue chip companies with stocks rated Buy across Wall Street are expected to lift the dividends they pay to shareholders. Not only is increasing dividends and returning capital to investors important, but it also shows that the company is doing well and has the earnings and cash flow strength to increase the payouts.
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