Despite ongoing inflation chatter, after spiking last week during the worst week for the markets since last October, interest rates have fallen back, and once again growth and income investors are looking for ideas. One good place to look for ideas is the BofA Securities US 1 list, which contains the firm’s top stock picks. What many feel makes sense for the second half of 2021 are dividend paying stocks with solid growth potential that can deliver solid total return. Total return is the amount an investor can earn from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested.
We screened the BofA Securities US 1 list, which contains the firm’s top 38 stock picks, looking for companies that pay a higher dividend than the S&P 500 index of 1.37%. Five do, and all make sense for investors looking for great stock ideas and income. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This top bank backed up somewhat recently and is offering an outstanding entry point. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations, and 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. Citi operates and does business in more than 160 countries/ jurisdictions in North America, Latin America, Asia, and Europe/Middle East and Africa.
Trading at a still very cheap 9.9 times estimated 2021 earnings, this company looks very reasonable in what remains a volatile stock market, and in a sector that has dramatically lagged.
Citigroup investors are paid a sizable 2.93% dividend. The BofA Securities team has a massive price target posted at $100, while the Wall Street consensus price objective is posted lower at $86.07. Citigroup shares closed trading Wednesday at 69.65.
Crown Castle International
This is a top cell tower company that offers incredible growth and income possibilities. Crown Castle International Corp. (NYSE: CCI) is one of the largest U.S. wireless tower companies with over 40,000 towers and approximately 80,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. market. The core business for the company is leasing space on its wireless towers primarily to wireless carriers, government agencies, and broadband data providers.
Crown Castle is one of the best stocks in the group for more conservative investors as the high yield distribution and low volatility make it a good holding for accounts seeking growth and income — and less risk.
Investors are paid a very solid 2.71% dividend. The BofA Securities price objective for the company is posted at $200, while the consensus price objective across Wall Street is set just lower at $196.72. The shares were last seen Wednesday at $196.01.
While less known than some of the other Conviction List members, this is a solid buy for growth and income investors. Eaton Corporation plc. (NYSE: ETN) operates as a power management company worldwide. Its Electrical Products segment offers electrical and industrial components, wiring devices, and structural support systems; and residential, single phase power quality, emergency lighting and fire detection, and circuit protection and lighting products.
The company’s electrical systems and services segment provides power distribution and assemblies, three phase power quality products, hazardous duty electrical equipment, explosion-proof instrumentation, utility power distribution equipment, power reliability equipment, and services.
Eaton’s hydraulics segment offers power, controls and sensing, and fluid conveyance products; and filtration systems solutions, industrial drum and disc brakes, and golf grips. The company’s aerospace segment provides hydraulic power generation and fuel systems, controls and sensing, and fluid and conveyance products for commercial and military use.
Investors in Eaton are paid a solid 2.11% dividend. BofA Securities has a $165 price target, which compares with the $161.05 consensus across Wall Street and Wednesday’s $144.41 close.
This medical technology giant is a solid pick for investors looking for a safe position in the health care sector and was a fairly recent addition to the US 1 list. Medtronic plc (NYSE: MDT) develops, manufactures, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. It operates in four segments: cardiac and vascular group, minimally invasive therapies group, restorative therapies group, and diabetes group.
The company announced last summer that the Blackstone Group’s life sciences division will invest $337 million into the research and development of its diabetes device technologies.
Under the terms of the agreement, Medtronic will receive funding for four diabetes research and development programs over the next several years. Medtronic’s engineering, clinical, and regulatory teams will conduct the development work for the programs.
Medtronic investors are paid a 2.01% dividend. The BofA Securities price target is set at $150, and that compares to the consensus price target for the stock set at $139.85. Medtronic shares closed Wednesday at $125.49.
This company 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 U.S. and serves 3 million retail customers in Texas and the Northeast.
NRG 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 (NYSE: NYLD), a publicly-traded, dividend growth-oriented company that owns 5 gigawatts of long-term contracted renewable assets.
Last summer, NRG bought Centrica Plc’s North American energy business, Direct Energy, in a $3.6 billion deal that will nearly double the number of homes and businesses it serves across the U.S. and Canada. 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.
NRG investors are paid a rich 3.53% dividend. The BofA Securities price target is posted at $46, while the consensus is slightly lower at $45.80. The stock closed Wednesday trading at $36.81.
While none of the dividends are gigantic, most are equal to or higher when compared to the puny 30-year Treasury bond of 2.12% that has zero growth potential and the S&P 500 yield, which has dropped substantially as the index has traded higher. Most importantly for investors, all of these companies have very strong and defensible business models and products, which should continue to excel over the years.
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