With 2020 mercifully ending today, many investors are evaluating portfolios for 2021. After what was an incredible run off the March and then September lows, many on Wall Street feel that the stock markets are fully valued, many trades are very crowded and small investor bullish sentiment as reflected by small lot call option trading is flashing a huge warning sign.
What many feel makes sense for 2021 are dividend-paying stocks with solid growth potential that can deliver solid total return. Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested.
We screened the BofA Securities US 1 list, which contains the firm’s top 37 stocks picks, looking for companies that pay among the highest dividends in the group. We found five top picks that make sense for investors looking for great stock ideas and income. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bristol-Myers Squibb
This remains a solid pharmaceutical stock to own long term and offers among the best values now for investors. Bristol-Myers Squibb Co. (NYSE: BMY | BMY Price Prediction) 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.
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The company’s products include the following:
- Opdivo for anti-cancer indications
- Eliquis, an oral inhibitor targeted at stroke prevention in adult patients with non-valvular atrial fibrillation, and the prevention and treatment of venous thromboembolic disorders
- Orencia for adult patients with active RA and prostate-specific antigen, as well as reducing signs and symptoms in pediatric patients with active polyarticular juvenile idiopathic arthritis.
Shareholders receive a very reliable 3.17% dividend. The BofA Securities team has its price target set at $80, while the Wall Street consensus target was last seen at $74.76. Bristol-Myers Squibb stock closed trading on Wednesday at $61.92 per share.
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Broadcom
The company reported solid earnings earlier this month and is also the newest member of the US 1 list. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
The company posted a modest earnings beat and raise as expected, as supply remains tight but the backlog is now at a record $14 billion, which is higher than in the first half of the past fiscal year. Demand visibility going out six months of non-cancellable orders shows 50% free cash flow margins. Toss in an 11% dividend boost, which is the highest in the chip arena, and everything seems to be clicking for Broadcom.
With the increase, the dividend now sits at a solid 3.31%. BofA Securities has a huge $530 price objective, while the posted consensus price target is $460.32. Broadcom stock closed trading most recently at $4354.83 per share.
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Comcast
This top media and entertainment company remains a Wall Street favorite. Comcast Corp. (NASDAQ: CMCSA) is the largest U.S. provider of cable services, with over 22 million basic subscribers. It owns NBCU, which includes the NBC TV Networks, Telemundo, MSNBC, USA, Syfy, Bravo, E!, CNBC and several other cable networks, as well as Universal Films and Universal Theme Parks.
Comcast has invested in technology to build an advanced network that delivers among the fastest broadband speeds and brings customers personalized video, communications and home management offerings.
Recently, the Bank of America analyst that covers the company noted with vaccinations beginning, Comcast shares are poised to outperform, driven by solid cable and improving NBCU/SKY results. The analyst modestly tweaked the fourth-quarter estimates and adjusted the firm’s 2021 estimates. The from also anticipates the NBCU segment to be recast in 2021.
Investors in Comcast stock receive a 1.80% dividend. The $53BofA Securities price target recently was lifted to $62. That compares with a $53.64 consensus target. The shares ended Wednesday trading at $51.21 apiece.
Eaton
While less known than some of the other US 1 list members, this is a solid buy for growth and income investors. Eaton Corp. (NYSE: ETN) operates as a power management company worldwide. Its Electrical Products segment offers electrical and industrial components, wiring devices and structural support systems, as well as residential, single-phase power quality, emergency lighting and fire detection, and circuit protection and lighting products.
The company’s Electrical Systems and Services segment provides power distribution and assemblies, three-phase power quality products, hazardous duty electrical equipment, explosion-proof instrumentation, utility power distribution equipment, power reliability equipment and services.
Eaton’s Hydraulics segment offers power, controls and sensing and fluid conveyance products, as well as filtration systems solutions, industrial drum and disc brakes and golf grips. The company’s Aerospace segment provides hydraulic power generation and fuel systems, controls and sensing, and fluid and conveyance products for commercial and military use.
Investors in Eaton stock receive a solid 2.45% dividend. BofA Securities has a giant $155 price target. The posted consensus target price is $123.26, and Wednesday’s closing price was $119.30 a share.
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Northrop Grumman
This was ranked as one of the top five defense contractors by sales last year. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide. It was also one of the companies profiting most from war.
The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.
The Information Systems segment offers advanced solutions for the Department of Defense, national intelligence and federal civilian, state, international and commercial customers. It provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing, civil security, health information technology, and government support systems.
The Technical Services segment provides logistics, modernization and sustainment services, as well as other advanced technology and engineering services, including space, missile defense, nuclear security, training and simulation services.
Shareholders receive a 1.92% dividend. BofA Securities has set a massive $455 price objective. The consensus price target is lower at $383.11. Northrop Grumman closed trading most recently at $302.61 per share.
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These five top stocks on the BofA Securities conviction list all pay dependable dividends that are all higher than the S&P 500 yield of 1.62%. With the market bloated and way overbought, these are much better ideas for growth and total return investors looking to take a little risk off the table but remain invested.
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