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4 Top Jefferies End-of-Year Stock Buys That All Pay Big Dividends
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With the market creeping toward the end of 2016, many of the firms we cover here at 24/7 Wall St. are in vacation mode, and new research, as is always the case this time of year, is hard to come by. While the Dow Jones Industrial Average seemingly inexorable climb toward 20,000 remains a top story, what many investors are really interested in is what are some solid stock ideas that they can put on now.
In a recent research roundup, the analysts at Jefferies are out with some late 2016 picks, and we found four stocks that could make good sense as we play out the string on 2016 and head into the new trading year next week. All are rated Buy at Jefferies and all pay solid dividends.
Boeing
This top aerospace industrial has been on a roll since the election and may be ready to breakthrough to multiyear highs. 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.
The company operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital.
Recent reports indicate that the U.S. Navy plans to divest its older model F/A-18 Hornet fighter jets in coming years and hopes to buy dozens of F/A-18E/F Super Hornets to deal with a shortfall of strike fighters aboard its carriers. If implemented, the plan would provide dozens of new orders for Boeing and keep its St. Louis production line running for several more years.
The Jefferies team also sees big value in the stock and said this in a research note:
Boeing’s 30% dividend hike was 2 times what we had expected, although shares have declined since the announcement. The dividend yield is now ~1% higher than the average DJI yield and given that Boeing’s recent yield has been in the 3% range, we see significant upside to shares. Looking at core earnings and adding back 787 amortization, shares trade at just 13 times our 2017 estimates, in line with stable growers, while cyclical shares are carrying multiples above 20 times earnings.
Boeing investors are paid a very solid 3.62% dividend. The Jefferies price objective for the stock is $185, the Wall Street consensus target price is at $156.50. The stock closed just above that level on Tuesday at $157.48 per share.
Blackstone Group
This top money management company makes solid sense for aggressive income investors. The Blackstone Group L.P. (NYSE: BX) provides financial advisory services to its clients, including public and corporate pension funds and academic, cultural and charitable organizations. The firm manages separate client-focused portfolios. Blackstone also launches and manages private equity funds, real estate funds, funds of hedge funds and credit-focused funds for its clients. It invests in private equity, public equity, fixed income and alternative investment markets.
The analysts noted this in their report:
It would also appear CEO Steve Schwarzman isn’t convinced that moving from a partnership structure to a c-corp is the right move for Blackstone or its unit holders. He is however of the belief that the incoming administration will bring with it sweeping architectural change that is pro-business and will prove to have a “profound” effect on the US economy.
Blackstone investors are paid an outstanding 5.95% distribution. Jefferies has a $31 price objective for the stock, while the consensus target is a bit lower at $29. Shares closed most recently at $27.74.
Dynagas LNG Partners
The company has continued to pay an outstanding distribution to unitholders. Dynagas LNG Partners L.P. (NYSE: DLNG) operates in the seaborne transportation industry worldwide. The company owns and operates LNG vessels. As of March 31, 2016, its fleet consisted of six LNG carriers, each of which has a carrying capacity of approximately 150,000 to 155,000 cubic meters. Dynagas GP serves as the general partner of Dynagas LNG Partners.
The company has continued to increase the distribution and, with U.S. LNG exports expected to jump dramatically, this could be a good play for aggressive income investors. The stock has seen some solid earnings estimate revision activity over the past month, and that suggests that Wall Street analysts are becoming a bit more bullish on the firm’s prospects in both the short and long term.
Dynagas investors are paid a stunning 10.85% distribution. Jefferies has set its price target at $18, and the consensus target is $16.94. The stock closed Friday at $15.57 a share.
Golar LNG Partners
This is another LNG shipping and storage play that holds a big distribution for shareholders. Golar LNG Partners L.P. (NASDAQ: GMLP) owns and operates floating storage regasification units (FSRUs) and LNG carriers under long-term charters in Brazil, the United Arab Emirates, Indonesia and Kuwait. The company also engages in the leasing of its fleets.
The Marshall Islands based company has a fleet of six FSRUs and five LNG carriers, a combined average remaining useful life of 25 years, and an average remaining charter duration of five-plus years. The company posted solid second-quarter results and also was successful in lowering leverage.
Golar LNG Partners has a diverse pipeline that includes Golar’s FLNG projects and, as a result, some analysts on Wall Street feel the company has the largest growth potential in its peer group with potential drop-downs/new-building inventories of 16 vessels.
Golar shareholders are paid a massive 10% distribution. The Jefferies price target is $25, and the consensus target is listed at $23.19. The shares closed most recently at $23.12.
While it is important to remember that master limited partnership (MLP) distributions can contain return of capital, these higher yielding companies can be a smart addition to more aggressive accounts.
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