If it seems as though 2018 is ripping by fast, you aren’t mistaken — it is. With summer just over a month away, and the traditional vacation season just around the corner, investors can also look forward to slow June through August trading, where often the bears will sneak in and take advantage of low trading volumes. One good idea may be to take some profit on winners and look for some contrarian ideas that could have solid upside and a degree of safety.
We screened our 24/7 Wall St. research universe looking for quality stocks that have taken a hit this year, that are Buy rated, and also pay good dividends. We found four companies that could be great summer selections, and good stocks to hold for the balance of the year.
AT&T
This company has been absolutely hammered and may be a great total return play. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.
With its shares trading at a very cheap 9.4 times estimated 2018 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
AT&T reported first-quarter results that missed consensus estimates, sending its shares down sharply in April, as it lost subscribers to its satellite and U-verse services. Despite the hit, the company still generates solid and dependable earnings and dividends.
AT&T shareholders are paid rich 6.22% dividend. The analysts at Jefferies rate the stock a Buy and have a $40 price target. That compares with the Wall Street consensus target of $38.35. The shares are trading Friday morning at $32.10.
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Altria
This maker of tobacco products and wine has been hit hard and offers value investors a great entry point. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate.
Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb along with strong share repurchase activity. The board also raised the dividend by 8.2% in 2017.
To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller.
Even though Altria released earnings for its first quarter that rose from the same period last year, the stock was hit sank to a 52-week low.
Altria investors are paid a hefty 5.02% dividend. The Merrill Lynch has set a $70 price target on this Buy-rated stock, and the consensus estimate is $70.38. The stock traded Friday morning at $56.15.
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Bristol-Myers
This remains a solid pharmaceutical stock to own. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.
The company announced last year that Biogen will pay $300 million upfront to Bristol-Myers to license a palsy drug with a $2 billion market opportunity and the potential to use that to treat Alzheimer’s. The company will pay a total of $410 million in milestone payments and a tiered double-digit royalty to license a drug known only as BMS-986168.
The company reported mixed first-quarter results as the firm’s immunotherapy drug, Opdivo, along with another of its medicines, Yervoy, topped Wall Street’s expectations. Unfortunately, results from Merck’s trial of its immunotherapy drug, Keytruda hit the stock hard last month as well. The company’s anticoagulant and immunotherapy drugs drove first-quarter revenue growth, but not enough to top expectations. It beat analysts’ earnings estimates, though, and did boost its full-year forecast.
Shareholders are paid a solid 3.09% dividend. SunTrust rates the stock a Buy and has a price target of $69. The posted consensus target is $59.20, and shares were last seen at $51.55.
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Qualcomm
This stock was blasted when a proposed buyout was canceled. Qualcomm Inc. (NASDAQ: QCOM) designs, develops and supplies semiconductors and collects royalties on wireless handheld devices and infrastructure based on its dominant position in CDMA and other related technology patents.
In addition, Qualcomm provides systems software and components to wireless handset vendors and promotes applications and services that run on high-speed wireless networks. The company operates primarily through two segments: CDMA Technologies and Technology Licensing.
The company ended up finishing the fiscal second quarter with a positive earnings surprise. The company generated $5.23 billion in revenue, which also topped Wall Street expectations.
The company has had a plethora of headline issues, not the least of which was a proposed buyout by Broadcom that the government put the kibosh on. That is in addition to ongoing issues with Apple that have kept a lid on the share price.
Shareholders are paid a hefty 4.94% dividend. Merrill Lynch rates the stock a Buy and has a $75 price target, which compares with a $62.09 consensus target. The stock was trading at $55.30.
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These four top companies pay big dividends and for one reason or another are trading way below their 52-week highs. While all the problems they face may not be ironed out this summer, smart investors can collect the big dividends as they wait for a turnaround.
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