Investing

5 Out-of-Favor Buy-Rated Stocks Yielding 5% or More

Wikimedia Commons

It’s nearly over, the almost 600-day election cycle marathon that every citizen of the country is sick and tired of. With the S&P 500 closing down again on Friday for the ninth straight day, that marks an event that hasn’t happened since December of 1980, which was also just after the completion of an election cycle. Wall Street just wants a decision, and one way or another, we should get it Tuesday night, although it could be late.

One thing the selling has done, and there could be more if Donald Trump ends up the winner, is bring down some top stocks rated Buy, and they are offering investors solid entry points and juicy dividends. Given the potential for volatility, investors may want to buy starting positions of, say, a third of the total to be acquired and see how the election plays out.

We screened our Wall Street research database and found five solid stock, all rated Buy, that are paying dividends near 5% or higher.

GameStop

This top retailer looks to benefit from new releases. GameStop Corp. (NYSE: GME) operates as an omnichannel video game retailer. It sells new and pre-owned video game hardware; physical and digital video game software; pre-owned and value video game products; video game accessories, such as controllers, gaming headsets, memory cards and other add-ons for use with video game hardware and software; and digital products, including downloadable content, network points cards, prepaid digital and subscription cards and digitally downloadable software.

The company also sells mobile and consumer electronics, including smartphones, tablets, headphones and accessories, as well as pre-owned smartphones; personal computer (PC) entertainment software in various genres, including sports, action, strategy, adventure/role playing and simulation; and strategy guides, magazines and gaming-related toys. As of January 30, 2016, it operated approximately 7,117 stores in the United States, Australia, Canada and Europe. GameStop primarily offers its products under the GameStop, EB Games and Micromania names.

The stock has been crushed since a very negative third-quarter pre-announcement, as well as ongoing difficult trends. Merrill Lynch lowered its price target but kept a Buy rating, given the valuation at current levels is very cheap and noting that the headwinds the company faces are fully disclosed. With a big dividend yield, and the fourth-quarter holiday season underway, a rebound is quite possible.

GameStop investors receive a 7.14% dividend. The Merrill Lynch price target is $25, and the Wall Street consensus target is $27.06. Shares closed Friday at $20.73.

GlaxoSmithKline

This top global pharmaceutical could offer outstanding total return for investors as solid portfolio holding. GlaxoSmithKline PLC (NYSE: GSK) offers pharmaceutical products in the therapeutic areas, including respiratory, anti-virals, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, and emesis, dermatology, rare diseases, immuno-inflammation, vaccines, and HIV. It also provides consumer healthcare products in wellness, oral health, nutrition, and skin health areas.

Last year the company announced that the dividend would stay at its current level through 2017, a solid pledge for those seeking security. Also, the FDA approved the company’s Nucala add-on product for severe asthma with a very broad label. In addition, its ViiV Healthcare unit also reported promising data for its HIV treatments. GlaxoSmithKline plans to submit up to 20 new regulatory filings within the next five years, which confirms a very strong pipeline.

The company posted strong third-quarter results, much of which was attributed to currency tailwinds. Merrill Lynch cited the attractive low-risk profile for investors, diversified growth potential and the above-average dividend.

GlaxoSmithKline investors receive a 5.35% dividend. Merrill Lynch has a $47.50 price target. The consensus price objective is $47.25. Shares closed Friday at $38.63.

Mattel

This top toy maker continues to pay outstanding dividends, and toys rarely are out of favor. Mattel Inc. (NYSE: MAT) designs, manufactures and markets a range of toy products worldwide. It offers dolls and accessories, vehicles and play sets, and games and puzzles under brands that include Barbie, Monster High, Disney Classics, Ever After High, Little Mommy, Polly Pocket, Hot Wheels, Matchbox, Toy Story, Max Steel, WWE Wrestling and DC Comics.

The company also provides its products under the Fisher-Price brands, including Fisher-Price, Little People, BabyGear, Laugh & Learn, Imaginext, Thomas & Friends, Dora the Explorer, Mickey Mouse Clubhouse, Disney Jake, the Never Land Pirates and Power Wheels. In addition, it offers its products under the American Girl brands, as well as construction and arts and crafts brands, such as MEGA BLOKS, RoseArt and Board Dudes. It also publishes the American Girl magazine.

UBS noted in a recent research report:

Mattel’s Jurassic license starts in July of 2017, with initial product (action figures, playsets, vehicles, games, plush, role-play, preschool etc.) expected to hit shelves in early 2018. Jurassic Park did ~$100M in net sales last year for Hasbro.

Investors receive a 5.0% dividend. The UBS price target is $36, and the consensus target is $35.64. Shares closed Friday at $30.46.

Royal Dutch Shell

This company has survived the plunge in oil pricing plunge as good as or better than any other major integrated stock. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and natural gas liquids.

Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.

In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.

The company generated 3.83 billion cubic feet per day of natural gas in the second quarter of this year from its integrated gas operations and another 6.40 billion cubic feet per day from its upstream operations. It produced solid third-quarter results that exceeded Merrill Lynch expectations. The firm noted in a recent research report:

We increase our estimates and price objective as a result of results – remaining above consensus. We reiterate our Buy rating and continue to see Royal Dutch Shell as our preferred Integrated Oil Supermajor.

Investors receive a 6.36 % dividend. The Merrill Lynch price target is $58. No consensus price target was posted. Shares closed Friday at $50.28.

Seagate Technology

Though still down over 40% from the highs posted last year, the stock has rallied huge off the lows printed in May. Seagate Technology PLC (NASDAQ: STX) designs, manufactures and sells electronic data storage products in the Asia-Pacific, the Americas and EMEA countries.

The company provides hard disk drives, solid state hybrid drives, solid state drives, PCIe cards and serial advanced technology architecture controllers that are designed for enterprise servers and storage systems in mission critical and nearline applications, as well as for client compute applications comprising desktop and mobile computing.

One of Wall Street’s biggest activist investors, ValueAct Capital, recently became one of Seagate’s largest shareholders with a new 9.5 million share stake. ValueAct established its new position via a secondary block trade, and will gain a seat at board meetings as an observer. ValueAct Capital generally invests in out-of-favor companies and works with them to make changes and boost long-term shareholder value.

Investors receive a 7.64% dividend, which many thought would be cut, but it has been held steady. Jefferies has a $38 price objective. The consensus target of $34.10 is below Friday’s close at $33.00.

While these out-of-favor stocks may still remain volatile, buying these top companies at deep discounts may end up being one of the best trades for the rest of 2016 and 2017.

The #1 Thing to Do Before You Claim Social Security (Sponsor)

Choosing the right (or wrong) time to claim Social Security can dramatically change your retirement. So, before making one of the biggest decisions of your financial life, it’s a smart idea to get an extra set of eyes on your complete financial situation.

A financial advisor can help you decide the right Social Security option for you and your family. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

Click here to match with up to 3 financial pros who would be excited to help you optimize your Social Security outcomes.

 

Have questions about retirement or personal finance? Email us at [email protected]!

By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.

By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.