It is hard to believe, but in just over three weeks the second quarter will come to a close and many investors will be reviewing their portfolios and making changes for the second half of 2021. One thing is looking ever more likely: At some point in the second half, the Federal Reserve will start tapering their $120 billion per month of asset purchases. That will surely trigger some angst, and we could see a market decline of 5% to 10%.
It makes sense now to move from the momentum and meme stocks to more conservative large-cap stocks that pay dividends. We screened the Dow Jones industrials, looking for the highest-yielding companies in sectors that look to benefit from the continued reopening of the country and the economy. All are rated Buy at major Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Chevron
This energy giant is a solid way for investors who are more conservative to be positioned in the sector. 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.
With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward. Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers (Noble integration, Permian, TCO/WPMP expansion, Gulf of Mexico exploration, Vaca Muerta, and so on) that should support production levels in the coming years.
Shareholders receive a 4.97% dividend, which the analysts feel will remain at current levels. BofA Securities has a $125 price target for the shares. The Wall Street consensus target is $120.33, and the last Chevron stock trade for Thursday was reported at $10.418 a share.
Coca-Cola
This remains a top Warren Buffet holding and offers not only safety but also an incredibly strong worldwide brand with 40% overseas sales. 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, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one 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 Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Investors in Coca-Cola stock receive a 3.03% dividend. The BofA Securities price target is $60, while the consensus target is $59.53. The shares closed on Thursday at $55.91 apiece.
24/7 Wall St.Dow
This stock offers investors growth and income potential. Dow Inc. (NYSE: DOW) is a leading materials science company and was formed from the merger of Dow and DuPont in 2017 and the subsequent spin-off 2019. The company is organized into three principal divisions: Performance Materials & Coatings (23% of EBITDA), Industrial Intermediates & Infrastructure (27%) and Packaging & Specialty Plastics (51%).
Dow’s segments include Agricultural Sciences, which is engaged in providing crop protection and seed/plant biotechnology products and technologies, urban pest management solutions and healthy oils. Consumer Solutions consists of Consumer Care, Dow Automotive Systems, Dow Electronic Materials and Consumer Solutions-Silicones businesses.
The Infrastructure Solutions segment consists of Dow Building & Construction, Dow Coating Materials, Energy & Water Solutions, Performance Monomers and Infrastructure Solutions-Silicones businesses. Performance Materials & Chemicals consists of Chlor-Alkali and Vinyl, Industrial Solutions and Polyurethanes businesses. The Performance Plastics unit consists of Dow Elastomers, Dow Electrical and Telecommunications, Dow Packaging and Specialty Plastics, Energy and Hydrocarbons businesses.
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Investors receive a 4.07% dividend. The $75 Jefferies price target for Dow stock is well above the $66.40 consensus target. Thursday’s closing share price was $67.99.
IBM
This blue-chip giant still offers investors a very solid entry point. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.
IBM’s five major segments are: 1) Cognitive Solutions, 2) Global Business Services, 3) Technology Services & Cloud Platforms, 4) Systems and 5) Global Financing. Analysts cite the company’s potential in the public cloud as a reason for their positive outlook going forward.
CEO Ginni Rommety, who had been in the position since 2012, stepped down in January, and the stock market greeted the news in a very positive manner. Arvind Krishna, who has led the company’s cloud computing business, became the new chief executive. Rometty will remain as executive board chair until the end of the year.
The dividend yield here is 4.35%. BofA Securities has set a $175 price target. The consensus target is lower at $143.82. IBM stock closed Thursday’s trading at $150.54 a share.
Merck
This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular issues, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, male pattern hair loss and fertility diseases.
The company also provides neuromuscular blocking agents for use in surgery, anti-bacterial products for skin and skin structure infections, cholesterol modifying medicines, non-sedating antihistamine and vaginal contraceptive products.
Shareholders receive a 3.51% dividend. The Truist Securities price target of $93 is in line with the consensus target of $93.29. Merck stock closed most recently at $76.14.
These five top companies from the venerable Dow Jones industrial average all still offer good entry points and are paying dependable dividends. Investors can almost count on the taper tantrum selling like in 2013 when the Federal Reserve begins to slow the quantitative easing this year, and these will be good stocks to be in when it does.
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