Investing

UBS Dividend Ruler Portfolio Stocks Raising Payouts at a Furious Pace

Lee Jackson

Published: March 10, 2017 8:25 am

Last Updated: January 12, 2020 2:05 pm

We often have noted here at 24/7 Wall St. that one of the keys for long-term investors is total return. This is important because despite the eight-year bull market, which we just celebrated the anniversary of, markets tend to have ups and downs that dividends help to smooth out. Again total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13% — 10% for the increase in stock price and 3% for the dividends paid.

A new UBS report, while not making any changes to the firm’s Dividend Rulers portfolio, points out that almost a third of the constituents in the portfolio have already raised the dividend they pay this year, and the average increase was a very solid 10%. The analysts point to earnings momentum as a positive for many companies, and it may help to explain the acceleration of dividend growth.

We screened the portfolio for the five stocks that currently have the highest yields.

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 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. Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.

Chevron investors receive a 3.93% dividend. The UBS price target for the shares is $114, while the Wall Street consensus target is $126.30. Shares closed Thursday at $110.04.

Coca-Cola

This company remains a top Warren Buffet holding and offers not only safety, but an incredibly strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, it is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.

Investors receive a 3.52% dividend. UBS has a $47 price target, and the consensus target is $43.54. Shares closed Thursday at $42.03.

Invesco

This financial services leader has strong positions in both equity exchange traded funds (ETFs) and actively managed equity and debt mutual funds. Invesco Ltd. (NYSE: IVZ) looks to be very well-positioned to capitalize on inflows into both segments, as well as higher asset prices, as many on Wall Street see a continuation of the eight-year bull market.

Invesco PowerShares is the boutique investment management firm that manages a family of exchange traded funds (ETFs). The company has been part of Invesco, which markets the PowerShares product, since 2006. The incredible growth and popularity of the product is why many on Wall Street remain so bullish on the stock. The analysts see the company as one that is best positioned to compete for share, given mix, product offerings and attractive relative performance.

Invesco investors receive a 3.47% dividend. The $30 UBS price target is less than the consensus target of $33.18 and Thursday’s close at $32.26.

NextEra Energy

With a very strong balance sheet, this company looks poised for a solid 2017 and is the only utility on the Dividend Rulers list. NextEra Energy Inc. (NYSE: NEE) is a leading clean energy company with consolidated revenues of over $17.0 billion and approximately 44,900 megawatts of generating capacity, which includes megawatts associated with noncontrolling interests related to NextEra Energy Partners.

Headquartered in Juno Beach, Florida, NextEra Energy’s principal subsidiaries are Florida Power & Light Company, which serves approximately 4.8 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the United States, and NextEra Energy Resources, which, together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun.

Investors receive a 3.05% dividend. The UBS price objective is $138. The consensus target is $136.73, and shares closed Thursday at $128.75.

VFC

This is one of the top apparel stocks to buy and a very consistent stock to own in portfolios. V.F. Corp. (NYSE: VFC) is a leading apparel wholesaler of lifestyle brands, including North Face, Vans, Wrangler, Lee, Timberland and Nautica. VFC distributes products globally via department stores, independent retailers, specialty chains and its own retail (full price, outlet and e-commerce).

Coalition segments include Outdoor and Action Sports (60% of 2015 revenue), Jeanswear (23% of revenue), Imagewear (9% of revenue), Sportswear (5% of revenue) and Contemporary (3% of revenue).

Shareholders receive a 3.19% dividend. The UBS price objective is $55, and the consensus target is $53.45. The stock closed Thursday at $52.066.

These five solid ideas from the UBS Dividend Rulers list make good sense for long-term, more conservative investors. It’s important to remember many companies have dividend reinvestment programs, wherein you can buy more shares with the dividends — a good way to dollar-cost-average buying shares.