Investing

Sell the Rally and Rate Hike Pause: 7 'Strong Buy' Analyst Favorites Pay Huge Dividends

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Wall Street is giddy again and ready to party like it is 1999 after the S&P 500 burst out of the longest bear market in over 70 years last week. Right on cue, the Wall Street cheering financial media and bullish strategists began pounding the table that a new and potentially strong bull market is on its way to glory. The reality is that the economy is slowing, as evidenced by the biggest increase in initial jobless claims last week since October of 2021. In addition, factory orders slumped in April, while the Institute for Supply Management gauge of U.S. services activity showed a big slowdown.
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Even more telling is that all the helicopter money from a decade of historical low rates, massive quantitative easing and pandemic handouts is gone, and consumers are starting to load their purchases up on credit cards that have very high rates if you hold any balance. Top economist David Rosenberg warned over the weekend that the recent rally is unfounded and the economy is almost guaranteed to crack into recession later this year.

What should investors do now? With the futures suggesting the Federal Reserve may pause their rate-hike campaign this week, which surely will send stocks higher, take profits on the strength and move the winnings to high-yielding money markets and use the original capital to buy stocks that pay huge and dependable dividends.

Seven top Buy-rated companies look like incredible ideas now and investors are wise to remember the Wall Street adage that “Nobody ever went broke taking a profit.” It is important to remember, though, that no single analyst report should be used as a sole basis for any buying or selling decision.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.


Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer, which some feel is worth more than $10 billion and may be a segment of the company that could be sold. Altria posted solid first-quarter results and announced a very shareholder friendly $1 billion stock buyback plan last year.

Shareholders receive an 8.35% dividend. Stifel has a $52 target price on Altria stock, and the consensus target is $49.21. The shares closed on Friday at $45.22 apiece.

Energy Transfer

The top MLP is a safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
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Energy Transfer is a publicly traded limited partnership with core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.

After the purchase of Enable Partners last December, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.

Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, as well as the general partner interests and 39.7 million common units of USA Compression Partners.

Investors receive a 9.53% distribution. Morgan Stanley has set its price target at $17. Energy Transfer stock has a consensus target of $17.14, and shares closed on Friday at $12.74.

KeyCorp

Shares of this top regional player are quite cheap at current levels for investors looking at financials. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.

KeyCorp also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.

KeyCorp stock investors receive a 7.44% dividend. The Goldman Sachs price target is $16. The consensus target is lower at $15.38, and the shares closed at $10.68 on Friday.

Omega Healthcare Investors

This company is in one of the fastest-growing subsectors of the real estate investment trust industry. Omega Healthcare Investors Inc. (NYSE: OHI) is a publicly traded, internally managed health care REIT focused on owning skilled nursing facilities. Most of its assets are such facilities, but the company also owns assisted living facilities, specialty facilities and a medical office property.
Omega’s portfolio of assets is operated by a diverse group of health care companies, predominantly in a triple-net lease structure. The assets span all regions within the United States, as well as in the United Kingdom. The company’s tenants generally have lower exposure to Medicare, which is where the funding pressures tend to remain, and less than 10% of revenues come from tenants with rent coverage below 1.0 times. In addition, the tenant base is very well diversified.

Shareholders receive an 8.67% distribution. The $33 Raymond James price target is higher than the consensus target of $30.64. Omega Healthcare Investors stock was last seen on Friday trading at $31.11.
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OneMain

This off-the-radar company has been around for over 100 years. OneMain Holdings Inc. (NYSE: OMF) is a financial service holding company that engages in the consumer finance and insurance businesses. It originates, underwrites and services personal loans secured by automobiles or other titled collateral or unsecured loans.

OneMain also offers credit cards and insurance products, comprising life, disability and involuntary unemployment insurance; optional non-credit insurance; guaranteed asset protection coverage as a waiver product or insurance; and membership plans. It operates through a network of approximately 1,400 branch offices in 44 states, as well as online.

Billionaire George Soros has a big position in the company and bought 275,000 shares in the fourth quarter of 2022. With very solid books and risk controls that keep net charge-offs low, the company offers big-time risk-reward for investors.

The dividend yield here is 9.23%. Royal Bank of Canada’s $53 target price compares with a $52.18 consensus target and Friday’s closing print of $42.98.

Pioneer Natural Resources

Many Wall Street analysts love this stock as a pure crude oil play, and the company also employs a variable dividend strategy. Pioneer Natural Resources Co. (NYSE: PXD) operates as an independent oil and gas exploration and production company in the United States.

The company explores for, develops and produces oil, natural gas liquids (NGLs) and natural gas. It has operations in the Midland Basin in West Texas. As of December 31, 2021, the company had proved undeveloped reserves and proved developed non-producing reserves of 130 million barrels of oil, 92 million barrels of NGLs and 462 billion cubic feet of gas, and it owned interests in 11 gas processing plants.

Its production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.
Pioneer Natural Resources is a huge player in the Permian Basin and the Eagle Ford in Texas, and it owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian, as it expects to deliver solid production growth going forward.
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Various media sources have said the company may still be in ongoing discussion with Exxon Mobil for a possible purchase or merger.

Pioneer Natural Resources stock comes with an 11.22% dividend, which varies from quarter to quarter. Piper Sandler’s target price of $319 is well above the $252.74 consensus figure and the most recent close at $204.80.

Verizon

This top telecommunications stock offers tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.

Verizon’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.

The company also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Investors receive a 7.40% dividend. Verizon Communications stock has a $49 price target at Cowen. The consensus target is $43.48, and Friday’s closing share price was $35.47.


Bull markets are sustained when the economy is gaining strength. While the breakout of the S&P 500 20% higher than the lows is significant, all bear markets are more than capable of bull market strength rallies. The current rally has been very narrow, with less than 10 stocks accounting for 95% of the gains. The best advice is to take profits and shift to passive income-producing winners while the investing wind is at your back.

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