UBS Makes February Changes to Market-Beating Dividend Ruler Portfolio

By Lee Jackson Updated Jan 13, 1:05PM EST · Published Feb 17, 11:35AM EST

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UBS Makes February Changes to Market-Beating Dividend Ruler Portfolio — © Thinkstock

One thing has become very clear as interest rates have plunged since the beginning of 2016: dividend stocks that were somewhat out-of-favor last year are looking to be much more in vogue this year. With the prospects for more Federal Reserve interest rate increases diminishing as growth and corporate profits slow, the top dividend stocks can offer total return for more conservative accounts.

In a recent research report, the UBS Dividend Ruler portfolio team made some of their first changes for 2016. They added back in a top consumer discretionary stock that offers outstanding dividends and good upside potential. They also removed a utility stock that has performed very well.

Here look at the changes to the portfolio and also highlight the three top-yielding companies.

The analysts removed Dominion Resources Inc. (NYSE: D) from the portfolio, citing a more challenging growth outlook in the near term due to fewer investment opportunities in the natural gas infrastructure segment. The stock also was recently downgraded to Neutral.

It is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems with 928 billion cubic feet of storage capacity and serves utility and retail energy customers in 13 states.

Dominion Resources shares closed Monday at $69.15.
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British American Tobacco PLC (NYSE: BTI) returned to the portfolio after being removed in December of last year after research coverage was dropped. The company manufactures and sells tobacco products, including cigarettes, roll-your-own tobacco and cigars, as well as other nicotine products and electronic cigarettes. The company offers its products globally under the Dunhill, Kent, Lucky Strike, Pall Mall, Viceroy, Kool and many other brands.

The UBS team cites the company’s solid brand portfolio and notes that the products tend to outperform the market and have consistently gained market share. In addition British American Tobacco owns 42% of Reynolds American which owns the Camel and Newport brands.

Shareholders are paid an outstanding 4.11% dividend. The Thomson/First Call consensus price target for the stock is $130.50. The shares closed most recently at $110.44.

Here are the three currently top-yielding companies in the Dividend Ruler portfolio.

Boeing Co. (NYSE: BA) together with its subsidiaries, designs, develops, manufactures, sells, services and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services worldwide. Investors in Boeing are paid a very solid 3.87% dividend. The consensus price target for the stock is $145.37. The shares closed trading on Tuesday at $112.60.

Intel Corp. (NASDAQ: INTC) is a world leader in computing innovation. It designs and builds the essential technologies that serve as the foundation for the world’s computing devices. As a leader in corporate responsibility and sustainability, Intel also manufactures the world’s first commercially available “conflict-free” microprocessors. The company provides processors for all the Apple desktop and notebooks. Investors are paid a solid 3.61% dividend. The consensus price target is $36.32. Shares closed Tuesday at $28.78.

Invesco Ltd. (NYSE: IVZ) is a financial services leader with strong positions in both equity and exchange traded funds (ETFs). Invesco PowerShares is the boutique investment management firm that manages the family of ETFs. The company has been part of Invesco, which markets the PowerShares product, since 2006. The incredible growth and popularity of the product is why many on Wall Street remain so bullish on the stock. Investors receive a very rich 4.04% dividend. The consensus target is $36.06, and shares closed Tuesday at $26.70.

As we have noted in the past, the Dividend Ruler portfolio has far outperformed the S&P 500 on a total return basis since the portfolio’s inception in 2003. For growth and income investors, the UBS stock picks are among the best in the business.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.