With the third quarter of 2021 underway and second-quarter earnings reports rolling out in a big way this week, many of the top firms we follow on Wall Street are making some changes to their lists of high-conviction stock picks for clients. With all the major indexes hitting all-time highs recently, it makes sense to examine these lists as the rest of the year could have some additional volatility as the political and geopolitical cycle could still prove to be very explosive components.
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The analysts at BofA Securities are making some big changes to the firm’s US 1 List of top stock recommendations. One new pick was added, and four that have performed admirably are being removed. While the newest addition is, of course, rated Buy, another top stock is being removed still carries a Buy rating as well.

We also screened the US 1 List for the top dividend stocks, and while interest rates rebounded some from last week’s massive bond rally, they still leave much to be desired when compared to dependable growth stock dividends.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Arch Capital Group Inc. (NASDAQ: ACGL) was removed from the US 1 List but still has a Buy rating at BofA Securities. As it has been trading very close to the 52-week high, this could be a valuation call.

Progressive Corp. (NYSE: PGR) is the newest member of the US 1 List. The insurance holding company provides personal and commercial auto, personal residential and commercial property, general liability, and other specialty property-casualty insurance products and related services in the United States. It operates in three segments.

The Personal Lines segment writes insurance for personal autos and recreational vehicles (RVs). This segment’s products include personal auto insurance, as well as special lines products, including insurance for motorcycles, all-terrain vehicles, RVs, watercraft, snowmobiles and related products.

The Commercial Lines segment provides auto-related primary liability and physical damage insurance and business-related general liability and property insurance for autos, vans, pickup trucks and dump trucks used by small businesses; tractors, trailers and straight trucks primarily used by regional general freight and expeditor-type businesses and long-haul operators; dump trucks, log trucks and garbage trucks used by dirt, sand and gravel, logging and coal-type businesses; and tow trucks and wreckers used in towing services and gas/service station businesses; as well as non-fleet and airport taxis and black-car services.

The Property segment writes residential property insurance for homes, condos, manufactured homes and renters, as well as offers personal umbrella insurance and primary and excess flood insurance. It also offers policy issuance and claims adjusting services, and it acts as an agent to place business owner’s policies, general and professional liability and workers’ compensation insurance. In addition, the company provides reinsurance services. It sells its products through independent insurance agencies, as well as directly on the internet through mobile devices and over the phone.

Shareholders receive just a 0.40% dividend. The BofA Securities price target for the stock is $126, while the consensus target is lower at $102.50. Progressive stock closed on Monday at $99.88 a share.

Here are the three highest-yielding stocks in the US 1 List.

Broadcom

This company has reported solid earnings this year and is also a big technology 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, servers and storage, factory automation, power generation and alternative energy systems and displays.

The dividend yield is 2.96%. BofA Securities has a huge $580 price objective, and the consensus target is just $530.62. Broadcom stock closed at $485.75 on Monday.
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Citigroup

This top bank stock backed up some recently and is offering an outstanding entry point. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations, governments a broad range of financial products and services.

Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.

Trading at a still very cheap 7.7 times estimated 2021 earnings, this pick looks very reasonable in what remains a bloated stock market and in a sector that has lagged some this year.

Citigroup stock investors receive a 2.94% dividend. The $100 BofA Securities price target is well above the $84.76 consensus target. The shares closed trading on Monday at $69.44. The company is slated to report earnings on Wednesday, July 14.

NRG

This stock has made a nice run off the lows and is a solid idea for more conservative investors. NRG Energy Inc. (NYSE: NRG) is an integrated independent power producer that owns and operates 27 gigawatts of conventional and renewable generating capacity in the United States and serves 3 million retail customers in Texas and the Northeast.

It derives revenue from the sale of electricity in the wholesale and retail markets and the sale of capacity. The company also owns a 64.5% interest in NRG Yield, a publicly traded, dividend growth-oriented company that owns 5 gigawatts of long-term contracted renewable assets.

Last Summer, NRG bought Centrica’s North American energy business in a $3.6 billion deal that will nearly double the number of homes and businesses it serves across North America. The all-cash deal to buy Direct Energy gave NRG 3 million more retail customers and is expected to generate about $740 million in annual adjusted earnings before interest, taxes, depreciation and amortization.

Investors receive a 3.15% dividend. BofA Securities has set a $47 price target, the same as the consensus target. NRG Energy stock closed most recently at $41.29.

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None of these dividends is gigantic, but most are equal to or higher than the puny 30-year Treasury bond of 1.99% that has zero growth potential, or the 1.32% S&P 500 average dividend, which has dropped substantially as the index has traded higher. Most importantly for investors, all these companies have very strong and defensible business models and products, which should continue to excel over the years.

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