Dividend stock rating that can overtake the market
Dividends are a way to make a reliable profit. But the companies that pay them are often inferior to market returns. A high percentage of dividends does not mean a high increase in the price of the stock itself.
For this case, Bank of America has developed a revenue sustainability model that tracks indicators such as free cash flow, business value, and return on equity. Here is a rating of dividend stocks that, according to this estimate, can outperform the market in terms of growth.
[Note: Stock prices and indicators in the article are indicated at the time of publication. You can see the current stock prices in a special widget at the end of the text. Before buying stocks, always do your own analysis. Investing money carries the risk of losing it. This article was published for review, not a call to purchase.]
1. H&R Block [NYSE: HRB]
• Stock Price: $ 25.44
• Dividend yield: 3.93%
This company is engaged in taxation business. It provides consultancy professionals and software worldwide..
H&R Block has the highest profit margin among other stocks. The company has one of the highest percentiles in terms of return on equity (37%) and the ratio of cash flow to market price (FCF / EV ~ 13%).
In 2018, stocks lagged behind the market. This means that investors received high returns due to dividends. In June, HRB increased the amount of dividend payments by 4.2%, and their current yield is 3.93%.
2. HP [NYSE: HPQ]
• Stock Price: $ 25.34
• Dividend yield: 2.20%
HP has a high profitability rating and a phenomenal share price increase of 161.6%. This is the maximum value among all companies verified by Bank of America. They have a good ratio of free cash flow to company value (11%). Shares should soon support $ 4 billion approved buyback plan.
Outdated HP printers and computers probably do not meet all the demand requirements, but HP holds on to the audience of competitors who have not survived in a complex environment. HPQ’s dividend yield is 2.2%, so Bank of America advises buying stocks with a price target of $ 28.
3. Broadcom [NASDAQ: AVGO]
• Stock Price: $ 244.23
• Dividend yield: 2.87%
A Singapore-based semiconductor product development company with joint headquarters in Singapore and San Jose, California. She has over 5,000 patents.
Now that Broadcom has completed all the merger procedures, it has returned to capital appreciation. AVGO has an FCF / EV of about 14% – this is the maximum ratio among the studied companies. The return on equity is 25.7%.
Dividends are set at 2.8%, but the company committed to pay 50% of their free cash flow in their form. This suggests that Broadcom dividend rates may rise in November to 3.8%. Bank of America says buy with a price target of $ 300.
4. Altria Group [NYSE: MO]
• Stock Price: $ 62.07
• Dividend yield: 5.16%
Tobacco giant Altria Group will continue to face pressure from regulators. But his modest forward profits, multiples of 14, and an impressive return of capital of 39.2% say that at the current level, buying MO will be a good deal. Altria’s free cash flow will increase by 48% in 2018. Thanks to this, the FCF / EV ratio will rise to 9%.
Altria Group pays 5.1% of dividends and is one of the best stocks in terms of profitability assessment. That is why they fell into this rating of dividend stocks. Bank of America advises buying MO with a price target of $ 70.
5. Lyondell Basell [NYSE: LYB]
• Stock Price: $ 103.50
• Dividend yield: 3.86%
Lyondell Basell Industries is a petrochemical company focusing on North American olefins and polyolefins. At the moment, the LYB margin is made up of low natural gas prices and high crude oil prices. The company has 10% FCF / EV and 32.1% return on capital.
Lyondell Basell has been steadily increasing its dividends since 2011, and their current return is 3.8%. True, rising prices for polyethylene led to an increase in production capacity, which in the coming years could adversely affect the company’s revenue..
6. Pfizer [NYSE: PFE]
• Stock Price: $ 44.91
• Dividend yield: 3.03%
Pfizer is one of the largest pharmaceutical companies in the world. She has a 10% cash flow to market price ratio and 22% capital return. The main short-term threat to PFE is the expiration of the Lyrica patent in December. Nevertheless, the company’s free cash flow threatens to grow by 50% in 2018. Forward Pfizer earnings are multiples of 14.1. This indicates that the capital return program is well funded, which provides additional protection against cheapening..
Pfizer’s dividend yield is 3.03%. Bank of America puts PFE a “buy” rating and advises targeting a $ 46 price target.
7. Verizon Communications [NYSE: VZ]
• Stock Price: $ 54.94
• Dividend yield: 4.39%
Verizon Telecommunications Company is rightfully included in this dividend rating. VZ is one of the most profitable securities, according to the analysis of Bank of America, and pays 4.3% of dividends. This is the highest among 30 Dow Industrial Average stocks..
Thanks to FCF / EV 9%, a return on capital of 20.6% and forward profit multiples of 11.2, VZ offers not only dividends, but also good prospects. In September, Verizon launched the first commercial 5G wireless service in Sacramento. Bank of America evaluates stocks as good to buy with a price target of $ 58.
8. Las Vegas Sands Corp. [NYSE: LVS]
• Stock Price: $ 58.90
• Dividend yield: 5.11%
Trade war USA with China has become a source of concern for casino investors in Macau. Because of this, shares in Las Vegas Sands, a casino-owned corporation, have lost a quarter of the price over the past 3 months, but the sale pushed dividends to 5.11%.
While investors are waiting for the end of the war, 7% FCF / EV, 21% return on capital and the announced $ 2.5 billion buyback program help keep the stock in good condition. Bank of America estimates LVS neutral and sets a price target of $ 80.
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