As we have noted in the past, despite the recent rally in the markets, all the indexes remain down for the year, and the persistent selling that started right when 2016 did has knocked some growth stocks into the value category. This is the best of both worlds for investors. When growth is put on sale as value, not only is there solid upside potential, but the downside is also limited due to the harsh selling.

In the weekly research report from Jefferies with the firm’s top value picks to buy, three big cap companies stand out, as they are all industry leaders, they are all very cheap on a relative basis and they all pay outstanding dividends for investors. Needless to say, all are also rated Buy at Jefferies.

AT&T

This company will continue to serve customers regardless of where the market trades. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV. It has TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.

With shares trading at a very cheap 12.5 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans as well.

The company announced recently that it is working with Salesforce.com to connect Internet of Things data from AT&T’s solutions into Salesforce’s Customer Success Platform. By connecting AT&T M2X into Salesforce’s Service Cloud, companies can automatically create and route service requests, cases or tickets through pre-built workflows.

While AT&T’s fourth-quarter earnings were in line with forecasts, and slightly below the Wall Street estimates, a change in accounting for the entertainment group lowered revenue/EBITDA by $300 million for the quarter. The analysts note that this knocked three cents off the bottom-line numbers. So, all in all, a solid quarter, and another reason for conservative accounts to own the stock, especially with solid DirecTV additions, and mid-single-digit earnings growth estimated for 2016.

AT&T investors are paid a huge 5.14% dividend. The Jefferies price target for the stock is $40, and the Thomson/First Call consensus target is $37.63. Shares closed Tuesday at $337.39 apiece.
Chevron

This is very solid story for investors looking to stay long the energy sector, and it is Jefferies’ preferred U.S. company to own now. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company sports a sizable dividend, and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some Wall Street analysts estimate the company will have a compound annual growth rate of over 5% for the next five years, and the stock trades at a modest valuation discount to some of its mega-cap peers.

Chevron management continues to aggressively pursuing cost saving initiatives and already has completed over 2,200 supplier engagements, with more in progress. Cost savings and improving investor sentiment may be a key for the mega-cap integrated as it has struggled mightily over the past year. While many on Wall Street concede that the oil market could be oversupplied for longer than most thought, massive overseas demand and production slowdowns should help pricing the rest of the year.

The company’s Permian Basin assets are a goldmine, and that the Australian LNG business will transition from a yearly $8 billion capital consumption drag to a $2 billion to $3 billion contributor. Combined with the much lower overall capital spending for the 2016 to 2018 period, the company is poised to not only hang around, but to end the sector slump in a much better position. Jefferies feels it is one of the lowest risk stocks to own in the sector.

Chevron investors receive a 4.97% dividend. Jefferies has a $110 price target, and the consensus estimate is set at $93.82. Shares closed trading on Tuesday at $86.13, up well over 3% on the day.

Viacom

Like other top media companies, Viacom Inc. (NASDAQ: VIAB) has been crushed over fears of consumers “cutting the cord” or leaving cable and satellite programming. The company creates television programs, motion pictures, short-form video, applications, games, consumer products, social media, and other entertainment content.

Viacom operates in two segments, Media Networks and Filmed Entertainment. The Media Networks segment provides entertainment content and related branded products through approximately 230 programmed and operated TV channels, including MTV, VH1, CMT, Logo, BET, CENTRIC, Nickelodeon, Nick Jr., TeenNick, Nicktoons, Nick at Nite, Comedy Central, TV Land, SPIKE, Channel 5, Tr3s, Paramount Channel and VIVA, as well as through online, mobile and apps.

Last year the company delighted shareholders with a very rich 21% dividend increase. Viacom has continued to reward shareholders and enhance its brands worldwide through the creation and acquisition of popular programs, new channels, successful motion pictures and other forms of entertainment, including video game offerings. Jefferies thinks that ratings are turning the corner and points to the continued massive discount the company trades in relation to its peers.

The CEO of the company recently announced plans to explore the sale of a minority stake in Paramount. The Jefferies analysts believe Paramount is worth at least $3.5 billion and also think that the current valuation implies the market values the studio at less than $1 billion, so a stake sale would help the company to realize some very outsized value.

Viacom investors receive a 4.26% dividend. The Jefferies price target is $49. The consensus is essentially in line at $48.69. The stock closed Tuesday at $37.56 per share.

Large cap growth with dividends that morphs into large cap value is a nice present for patient investors who have some dry powder. Add in a sprinkle of Wall Street wide negativity, and investors could end up doing outstanding with these top value stocks to buy.

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