Investing

Jefferies Says Buy These Dividend-Paying Companies That Missed Expectations

Lee Jackson

Published: February 28, 2017 9:05 am

Last Updated: January 12, 2020 2:25 pm

We have written on numerous occasions that it has become harder with each passing trading day to find stocks that are not sky-high expensive. We are in the phase of the bull market in which stocks are melting up, because worried portfolio managers are concerned with performance and retail investors don’t want to miss the train leaving the station.

The Dow’s 12th record close Monday was the longest winning streak since 1987, and we know what happened then.

The Jefferies U.S. Insight team, along with the firm’s stable of outstanding analysts, looked through their coverage universe for companies that are still attractive, and they noted this:

We have highlighted 10 Buy-rated stocks which have underperformed since earnings report and where our analysts believe post-quarter selloffs are overdone and the underperformance offers opportunity. Two of these ten stocks are on our Franchise Picks list and in most of these cases, Jefferies’ fiscal 2017 earnings-per-share estimates are ahead of the Street’s.

We picked five that are solid companies that also pay very good dividends. In the event they stay out-of-favor, investors will get paid to wait. Two even make the Jefferies Franchise Picks list.

CA

This is a company for which the new business may be growing faster than renewals. CA Inc. (NASDAQ: CA) provides information technology (IT) management software and solutions that help organizations plan, develop, manage and secure applications and IT infrastructure in the United States and internationally. The company operates through three segments: Mainframe Solutions, Enterprise Solutions and Services.

CA Technologies’ APM solution stands out with its customer experience capabilities, managing real-user transactions via JavaScript injection, SDK and deep packet analysis, ability to manage microservices and containers, and strength in its analytics engine to ingest a variety of sources.

The stock was hit on poor 2017 guidance is the fiscal third-quarter results, but the analysts feel even a small shift in growth could move the shares.

CA investors receive a 3.13% dividend, which protects some against downside. The Jefferies price target for the stock is $38, and the Wall Street consensus target is $32.80. Shares closed near that level Monday at $32.57.

Chevron

This integrated giant is a safer way for investors looking to stay long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is an 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. Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.

Jefferies just added the stock to its Franchise Picks list, and while the company missed estimates badly, the analysts feel the company is the best positioned integrated.

Chevron investors receive a 3.87% dividend. The $147 Jefferies price target is a Wall Street high. The consensus target is $126.25, and shares closed Monday at $111.75.

Gilead Sciences

This stock is trading at an astounding multiple of less than seven times estimated 2016 estimated profits. Gilead Sciences Inc. (NASDAQ: GILD) discovers, develops and commercializes medicines in areas of unmet medical need in North America, South America, Europe and the Asia-Pacific.

Its products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

The stock was hit on 2017 guidance, which was much lower than expected on diminishing hepatitis C revenue. However, the analyst is positive on the company’s HIV franchise going forward. It also cited new drug filings this year as potential catalysts.

Shareholders receive a 2.65% dividend. Jefferies has an $83 price target, but the consensus price objective is $95.01. Shares closed Monday at $70.50.

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 released disappointing fourth-quarter results and cited late holiday consumer shopping as a reason. The analyst feels the company is making a turnaround and the potential in China is seen a positive.

Shareholders receive a 5.85% dividend. The $32 Jefferies price target compares with the consensus target of $30.33. The stock closed most recently at $26.

Newell Brands

This top consumer goods stock is also on the firm’s Franchise Picks, and given the big sell-off in the shares since August, it may be offering investors and outstanding value at current levels. Newell Brands Inc. (NYSE: NWL) is a manufacturer and marketer of consumer products has six reporting segments, including the recently acquired Jarden.

The segments are: Writing (Sharpie, Paper Mate, Waterman, Parker), Home Solutions (Rubbermaid, Calphalon, Goody), Tools (Irwin, Lenox), Commercial Products (Rubbermaid Commercial Products, Rubbermaid Healthcare), Baby & Parenting (Graco, Aprica) and Jarden (with 120 brands including Yankee Candle, Jostens, Oster, Sunbeam, Mr. Coffee, K2, Marmot, Rawlings, Coleman and First Alert).

The company reported softer core brand sales in the fourth quarter and cited weaker mall traffic and appliance reorder rates. The analysts also pointed to the fact the company trades a massive valuation discount to their peers.

Shareholders receive a 1.55% dividend. The Jefferies price target is $61. The posted consensus target is $56.56. The stock closed Monday at $49.49.

Five top companies that hit some economic potholes but are primed for a comeback. They all are well known, make a variety of consumer and commercial products and will be around in the future.