Investing
S&P 500 Dividend Yield Lowest in 20 Years: 5 Blue Chips to Buy Now With Huge Dividends
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Time and time again, the Wall Street pundits say interest rates are going higher, and time and time again they plunge lower. Last week the benchmark 10-year Treasury bond yield hit the lowest level since February, and the S&P 500 yield currently is at its lowest in 20 years a paltry 1.35%. So what are investors that need income and look to equities to do? One idea is to search for quality companies that pay regular and dependable dividends.
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We screened our 24/7 Wall St. research universe looking for safe blue chip companies that pay big dividends and still have solid growth prospects for the rest of 2021 and beyond. All five are rated Buy at top Wall Street firms, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AbbVie
This is one of the top pharmaceutical stock picks across Wall Street, and 34% of fund managers own the shares. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of last year.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 4.41% dividend. SVB Leerink has a street-high price target of $144, and the Wall Street consensus target is just $124.08. AbbVie stock closed trading on Monday at $117.79.
24/7 Wall St.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.
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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 5.31% dividend, which the analysts feel comfortable will remain at current levels. The BofA Securities price target is $125, while the consensus target is $122.79. The final Chevron stock trade for Monday was reported at $100.95.
24/7 Wall St.LyondellBasell
This top chemical company with a sterling balance sheet is another solid play for conservative investors. LyondellBasell Industries N.V. (NYSE: LYB) manufactures chemicals and polymers, refines crude oil, produces gasoline blending components and develops and licenses technologies for production of polymers.
Over half of earnings are generated in the company’s Olefins and Polyolefins Americas segment, where costs are linked to the price of cheap natural gas in the United States, while selling prices are correlated with the price of oil. The company has pursued a strategy of low-cost, high return on invested capital debottlenecks coupled with cash returns to shareholders.
Note that debottlenecking is the process of identifying specific areas or equipment in oil and gas facilities that limit the flow of product (known as bottlenecks) and optimizing them so that overall capacity in the plant can be increased.
LyondellBasell Industries stock investors receive a 4.59% dividend. The huge $140 Wells Fargo price target compares to the $118.14 consensus target and Monday’s close at $98.55 a share.
Philip Morris
This company has continued to grow global market share and its stock makes good sense for total return investors now. Philip Morris International Inc. (NYSE: PM) is one of the largest international cigarette producers, with a share of 28% of the international cigarette/heated tobacco market. Key combustible brands include Parliament, L&M and Marlboro, also one of the most valuable brands in the world.
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The company is commercializing IQOS, a heat-not-burn product, in over 40 markets, which could drive earnings in the years to come. Most on Wall Street believe the company offers superior underlying growth prospects, both near term and long term. The share price has been weak of late as investors have questioned the growth potential of its reduced-risk products, and the overall market weakness has contributed. All of its sales are outside of the United States.
Shareholders receive a 4.85% dividend. BofA Securities has set a $114 price objective. The consensus price target is $108.07, and Philip Morris International stock closed at $99.04 on Monday.
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 4.50% dividend. The analysts at Cowen recently lifted the price target to $68 from $66. The consensus target is $60.51, and Verizon Communications stock ended Monday’s trading session at $55.78 a share.
With yields remaining at generational lows, and the prospect of them going meaningfully higher in the near term seemingly off the table, it makes sense for growth and income investors to consider these top stocks, none of which is as crowded and as overbought as most of the market is.
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