Investors love dividends and one top means of determining how solid a dividend can be after earnings is cash flow. Credit Suisse uses a systematic and objective framework within its “HOLT” team. The research group has 30 preferred stock ideas in which it sees strong returns on cash flows with compelling characteristics in its models. The firm is also more skewed to what it called “high operational qualities” due to the heightened uncertainty in the stock market.
HOLT Team
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While 30 companies may be a lot to ponder, the HOLT team has three new ideas for the third quarter of 2020. These companies all have strong cash flows and solid dividends, and they also come with alternative price targets that are different from their fundamental analyst ratings. The firm employs a cash flow return on investment (CFROI) analysis to look for additional longer-term upside.
Here, 24/7 Wall St. features these companies, along with Credit Suisse’s HOLT team analysis, and we have added some commentary. Also included are the most recent prices, the trading ranges, the Refinitiv consensus analyst target prices, and what each stock’s dividend looks like.
Top Cash Flow Ideas With High Ratings
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3. Comcast Corp.
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- Ticker Symbol:Â NASDAQ: CMCSA
- Dividend Yield:Â 2.3%
- Industry:Â Media and Communications
High CFROI Ratings
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Comcast has shown increasing levels of CFROI over the past decade. This may be largely due to its improvements in the NBCUniversal unit. The firm’s target price is $48 and its rating is Outperform, but its HOLT valuation is considered to be a contrarian theme, and that target would be up at $62.96.
2. eBay Inc.
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- Ticker Symbol:Â NASDAQ: EBAY
- Dividend Yield:Â 1.3%
- Industry:Â E-Commerce
E-Commance Giant
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eBay currently stands out for its high-quality CFROI profile. The stock also appears to have attractive valuations and low market expectations. Additional boosts are expected from a new chief executive officer, increased share repurchases, and growth in the digital payments arena. Credit Suisse rates eBay as Outperform and has a $53 price target, but its cash flow valuations would dictate a valuation of $65.92. While eBay has only a 1.3% dividend yield, it is still relatively new to dividends, after it began paying them in 2019. Many investors also expect that eBay will be a dividend grower in the years ahead, and it was one of the stay-at-home winners in the new economy.
1. Lockheed Martin Corp.
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- Ticker Symbol:Â NYSE: LMT
- Dividend Yield:Â 2.6%
- Industry:Â Weapons Manufacturing
Defense Contractor Giant
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Lockheed Martin has a strong cash flow profile as well. The defense contractor’s competitive advantages over peers and the resilience of its end markets are key drivers here. Credit Suisse also pointed out that expectations are low relative to its forecasts, despite having clear visibility on future business. Credit Suisse’s rating on Lockheed Martin is actually Neutral, but the $433 price target is handily higher than the latest $360.42 closing price. The firm’s HOLT valuation was shown to be $698.61.
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