Investing
Top Wall Street Strategist Says Buy Defensive Dividend Growth for the Rest of 2021
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Tuesday’s big reversal should remind investors that some of the current realities, while not totally baked in as certainties, really need to be considered when portfolio planning for the rest of 2021. The biggest consideration is the giant move the stock market has made off the March 2020 lows. Much of the initial gains were filling in the massive hole dug in barely a month, but after the S&P 500 crawled back to where was before the sell-off, the market is up an additional 19% in less than a year.
In addition, despite the Federal Reserve dismissing the current increase of inflation as “transitory,” the reality is everything has gone higher in price. While the rate of the increases in pricing may pause, it is unlikely to go back down. Furthermore, at some point the Fed will have to stop buying bonds to suppress interest rates. When it does, we could have another “taper tantrum” like in 2013.
One of the best minds on Wall Street is BofA Securities Chief Investment Strategist Michael Hartnett, who makes the case that investors should rotate like many money managers on Wall Street are to what he terms as “defensive growth,” which includes sectors like consumer staples, big pharmaceuticals, dominant phone companies and utilities.
We screened the BofA Securities research universe looking for stocks rated Buy that are in those sectors and found five that look like solid ideas for growth investors who also like a dividend kicker. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now and was hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs, and it has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
Shareholders receive a 6.88% dividend. BofA Securities has a $58 target on the shares, and the lower consensus price target is $53.45. Altria stock closed on Tuesday at $49.99 a share.
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) 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’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 3.00% dividend. The BofA Securities price target is $78, while the consensus target is $75.63. Bristol Myers Squibb stock closed at $65.50 per share on Tuesday.
24/7 Wall St.Kellogg
No matter how dicey things get, consumers will still have to eat, and this company is a leader. Kellogg Co. (NYSE: K) is the global leader in breakfast cereal, as well as a leader in categories such as cookies, crackers, cereal bars and toaster pastries. Kellogg is a focused organization with 82% of sales coming from three businesses: North American retail channel snacks (30%), International cereal (28%) and North American retail channel cereal (24%). Over 60% of total sales are in the United States, but the company has a growing presence in Europe, Latin America and the Asia/Pacific.
The company offers its products under the Kellogg’s, Cheez-It, Pringles, Austin, Parati, RXBAR, Kashi, Bear Naked, Eggo, Morningstar Farms, Choco Krispies, Crunchy Nut, Nutri-Grain, Special K, Squares, Zucaritas, Sucrilhos, Pop-Tarts, K-Time, Split Stix, Be Natural, LCMs, Coco Pops, Rice Krispies Squares, Kashi Go, Vector and Gardenburger brand names.
Shareholders receive a 3.51% dividend. The $76 BofA Securities price target is well above the $67.78 consensus target. Kellogg stock closed on Tuesday at $66.04.
Southern Company
This large-cap utility leader makes sense for very conservative accounts. Southern Company (NYSE: SO) engages in the generation, transmission and distribution of electricity. It also constructs, acquires, owns and manages power generation assets, including renewable energy and battery energy storage projects and sells electricity in the wholesale market.
The company distributes natural gas in Illinois, Georgia, Virginia and Tennessee, as well as provides gas marketing services, wholesale gas services and gas pipeline investments operations. It constructs, operates, and maintains 75,924 miles of natural gas pipelines and 14 storage facilities with total capacity of 157 Bcf to provide natural gas to residential, commercial, and industrial customers. The company serves approximately 8.6 million electric and gas utility customers.
Southern Company also owns or operates 30 hydroelectric generating stations, 24 fossil fuel generating stations, three nuclear generating stations, 13 combined cycle/cogeneration stations, 44 solar facilities, 13 wind facilities, one fuel cell facility and one battery storage facility. It also provides products and services in the areas of energy efficiency and utility infrastructure. In addition, the company offers digital wireless communications and fiber optics services.
Shareholders receive a 4.11% dividend. BofA Securities has set a $72 price target. The consensus target is $67.22. Southern Company stock ended Tuesday trading at $64.16 a share.
24/7 Wall St.Verizon
Shares of this top telecommunications company offer tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.
The company’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.
Verizon acquired AOL and Yahoo to create the Oath digital content platform, which the company recently sold at a sizable loss to Apollo Global Management for $5 billion. The sale allows Verizon to offload properties from the former internet empires, though it will keep a 10% stake in the company and it will be rebranded to just Yahoo.
Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
Investors receive a 4.39% dividend. The BofA Securities price objective is $64. The consensus target price is $60.10, and Verizon stock closed most recently at $57.18.
The bottom line is that, by any measure, the stock market remains overbought, expensive and long due for a breather. That probably means more than a one- or two-day 3% decline. With that noted, there are very few alternatives for those that need some growth and, most importantly, consistent income. These five stocks all supply both and make sense for growth and income investors.
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