It is pretty clear after the worst first half for the S&P 500 in over 50 years that we are trapped inside a bear market that could have another 15% downside or more before it is all played out. The consumer price index expectation for tomorrow is at a stunning 8.8%. Even if the number comes in lower, it will still represent the worst inflation in over 40 years, and does not look to improve anytime soon.
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So what are investors to do? Buying bonds in a rising interest rate is hardly a good idea, unless they are linked to inflation or are of the floating rate variety. At 24/7 Wall St. we think the best plan is to stick with stocks that are printing solid profits and paying big dividends.
We screened the BofA Securities US 1 list, which is the 37 top stock picks at the firm. We searched for the highest dividend-yielding companies and found six that look like incredible second-half ideas. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Ares Management
This stock delivers an above-average dividend to go with its solid growth potential. Ares Management Corp. (NYSE: ARES) operates as an alternative asset manager in the United States, Europe and Asia. The company’s Tradable Credit Group segment manages various types of investment funds, such as commingled and separately managed accounts for institutional investors, as well as publicly traded vehicles and sub-advised funds for retail investors in the tradable and non-investment grade corporate credit markets.
The Direct Lending Group segment provides financing solutions to small to medium-sized companies. The company’s Private Equity Group segment focuses on majority or shared-control investments primarily in undercapitalized companies. While the Real Estate Group segment invests in new developments and the repositioning of assets, with a focus on control or majority-control investments, and it originates and invests in a range of self-originated financing opportunities for middle-market owners and operators of commercial real estate.
Investors receive a 4.08% dividend. The BofA Securities price target is $110, well above the consensus target of $88.70 and the most recent close at $59.75 per share.
24/7 Wall St.BlackRock
Many on Wall Street love this firm’s near-term growth potential, but also for the long term, and it is a top financial in the US 1 list. BlackRock Inc. (NYSE: BLK) is the largest asset manager in the world, with more than $5 trillion in assets under management. Its acquisitions of Merrill Lynch Investment Management and iShares transformed it from a fixed income manager into a multiproduct and multichannel giant, with roughly 40% of its assets under management overseas. It has leading franchises in exchange-traded funds (ETFs), institutional fixed income, alternatives and cash. It also operates Solutions, a leader in risk analytics.
The company’s strong historical and prospective dividend growth is underpinned by the high-quality and diversified business model. Dividends have increased 18% annually over the past 10 years. Dividend growth likely will moderate but remains solid in the low teens, consistent with expectations for earnings growth in the years ahead.
Shareholders receive a 3.23% dividend. BofA Securities has a $972 price objective on BlackRock stock. The consensus target is lower at $751.90, and shares closed on Monday at $605.00 apiece.
Broadcom
This stock has been crushed, and while suitable only for more aggressive investors, Wall Street continues to like the company for dividend growth. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
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Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, servers and storage, factory automation, power generation and alternative energy systems and displays.
The BofA analysts and many on Wall Street are very positive on the company’s massive $10 billion share repurchase authorization, which represents about 4.2% of the company’s market cap.
Broadcom stock investors receive a 3.40% dividend. The $625 BofA Securities team price target is less than the $681.76 consensus target but still well above Monday’s close at $482.86.
Coca-Cola
This remains a top Warren Buffet holding, as he owns a massive 400 million shares. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Investors receive a 2.80% dividend. BofA Securities has set a $70 target price, while the consensus target is $69.79. Coca-Cola stock closed on Monday at $62.94.
Kraft Heinz
Even in bad times, everybody has to eat, and this company always stands to benefit. Kraft Heinz Co. (NASDAQ: KHC) was formed via the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $29 billion of annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House.
Kraft Heinz is the third-largest food and beverage manufacturer in North America, deriving 76% of revenues from that market and 24% internationally. Additional brands include Oscar Meyer, Maxwell House, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
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Buffett holds a massive position in Berkshire Hathaway of 325 million shares, which is a stunning 26.6% of the company’s stock float.
Kraft Heinz stock comes with a 4.14% dividend. The BofA Securities team’s $48 price target compares with a $42.97 consensus target and Monday’s close at $38.61.
Pfizer
This top pharmaceutical stock was one of the winners in the COVID-19 vaccine race. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide.
Pfizer offers medicines and vaccines in various therapeutic areas, including the following:
- Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
- Biologics, small molecules, immunotherapies and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena and Braftovi brands
- Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga and Paxlovid brands.
- Pneumococcal disease, meningococcal disease, tick-borne encephalitis and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba and the Prevnar family brands
- Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis and Cibinqo brands
- Amyloidosis, hemophilia and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX and Genotropin brands
Shareholders receive a 3.03% dividend. BofA Securities has a $70 price objective. The consensus target on Pfizer stock is $58.49. The shares ended Monday’s session trading at $52.89.
These six top companies have solid dividends and are in sectors that should continue to hold their own for the rest of 2022. Given that this week will kick off the second-quarter earnings reporting season, it makes sense to buy partial positions in these stocks and see how the results come in. While all should be solid, any company that misses estimates or gives lousy forward guidance (or both) will be met with some harsh selling, given the current bear market environment.
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