Investing

4 Jefferies Large Cap Franchise Picks That Also Pay Solid Dividends

Lee Jackson

Published: September 20, 2016 8:20 am

Last Updated: January 13, 2020 3:23 am

With the third quarter all but over, and the market waiting this week to see if the Federal Reserve will increase rates (which most think they won’t), we are taking a look at the stocks that make sense for the run to 2017. Most Wall Street strategists agree that the way to play the fourth quarter and next year is with large cap stocks that pay and consistently increase their dividends.

We screened the Jefferies Franchise List stocks, which are the ones the firm ranks highest for its institutional and high net worth clients, and found four companies that look like good picks to finish up the year with. All are rated Buy and pay dividends that are at least as high as the 10-year Treasury yield.

AbbVie

This stock is one of the top global pharmaceutical stocks picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company’s mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. AbbVie employs more than 26,000 people worldwide and markets medicines in more than 170 countries.

One of the biggest concerns with AbbVie is what eventually might happen with anti-inflammatory therapy Humira, which generated $14 billion in sales in fiscal 2015. That was the most any drug has recorded during a single year and represents a gigantic part of the company’s overall earnings. The problem is that biosimilars and generics are itching to enter the market with Amgen leading the charge, and some Wall Street analysts project that AbbVie may have a difficult time stopping that trend.

Back in May, the patent board instituted Coherus BioSciences’ Inter Partes Review against the Humira ‘135 patent. The outcome of the review is expected in 12 months. While most analysts remain positive on Humira duration, the expected litigation uncertainty could continue to create an overhang on the stock, which does give investors chances to pick up shares lower.

AbbVie investors are paid an outstanding 3.62% dividend. The Jefferies price target for the stock is $90, and the Wall Street consensus target is $71.28. The stock closed most recently at $62.91 a share.

Boeing

This top aerospace industrial is still down over 10% since the beginning of the year, and we recently noted it has been the worst performing Dow Jones Industrial Average stock this year. 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.

Top Wall Street analysts have increased confidence in continuing good demand, and they note that the company has made announcements in the past that support the thesis that the productivity and margins will continue to improve. 787 execution is good as the company works through the backlog, and cash flow looks to be strong with 787 deliveries and C-17 orders. Some Wall Street analysts also point to continued lower oil prices as a bullish indicator for the top carriers who are Boeing’s big customers.

Boeing investors are paid a very solid 3.44% dividend. The Jefferies price target is set at $165, and the consensus price target for the stock is $149.27. The shares closed trading on Monday at $127.48.

Halliburton

This company has ticked higher since the deal with Baker Hughes fell through due to regulators’ concerns, but it is still down almost 45% from highs printed two years ago. Jefferies recently added the company to the Franchise Picks portfolio. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry.

The company serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

The oil field giant announced last year a $1 billion investment to develop huge potential oil fields in Ecuador and has entered into a long-time deal with Petroamazonas, an Ecuador-based company involved in the exploration and development of the country’s oil reserves. With oil looking to stabilize in the $40 to $50 range, this top oil service company is a great stock to buy on sale, as the oil recovery has shown some legs.

Top Wall Street analysts see the end of the Baker Hughes deal as removing uncertainty on the company and also think that the company still has acquisition possibilities that could help expand the business footprint.

Halliburton investors receive a 1.56% dividend. The $56 Jefferies price target is higher than the consensus target of $51.44 and Monday’s closing share price of $41.28.

Ingersoll-Rand

This is one of the many top companies that restructured and is now based in Ireland. Ingersoll-Rand PLC (NYSE: IR) is another top industrial stock to buy and, with the housing market continuing to grow, the company’s wide range of portfolio products should continue to sell well. Many on Wall Street also see the stock as a good play on the replacement, upgrade and, ultimately, growth in the commercial and residential air conditioning markets. Trends in these markets have been highly correlated with overall commercial construction and are thus earlier in the cycle.

Ingersoll Rand has an outstanding portfolio of global brands and holds leading market share in all major product lines. The geographic and industrial diversity coupled with a large installed product base provides solid growth opportunities for the company within service, spare parts and replacement revenue streams.

Ingersoll-Rand investors are paid a 2% dividend. The Jefferies price objective is set at $75. The consensus target price is $74.56. Shares closed on Monday at $64.02 apiece.

Four companies in four very different sectors that all offer liquidity, a degree of safety and solid dividends that should continue to rise. All are trading well below 52-week highs and look like good additions to long-term growth portfolios.