The best-ranking large-cap dividend stocks. The higher the U.S. stock market goes, the more important stock selection becomes for investors. The environment can be more difficult for dividend investors, as rising interest rates make fixed…
The best-ranking large-cap dividend stocks.
The higher the U.S. stock market goes, the more important stock selection becomes for investors. The environment can be more difficult for dividend investors, as rising interest rates make fixed income alternatives more attractive. One way for investors to historically identify the best-performing large-cap dividend stocks is to use the Quintile 2 Russell 1000 screen. By ranking the Russell 1000 stocks by dividend yield and dividing them into five groups, Bank of America has found that stocks in the second highest group tend to outperform their peers. Here are nine dividend stocks currently in Quintile 2.
Public Service Enterprise Group has a 3.3 percent dividend yield, one of the highest among Quintile 2 stocks. The diversified energy company owns both Public Service Electric & Gas in New Jersey and energy supply company PSEG Power. Analyst Julien Dumoulin-Smith says PEG should be able to grow its regulated utility business at a solid clip. In addition, the company has a major potential expansion opportunity in offshore wind and transmission, where it holds an incumbent advantage over potential competitors. Bank of America has a “buy” rating and $58 price target for PEG stock.
Coca-Cola struggled with a difficult North American beverage market in recent years, but analyst Bryan Spillane is bullish on KO stock headed into 2019. Spillane says Costa Coffee could give Coca-Cola a boost in both morning (hot) and afternoon (cold) beverage sales. In addition, Costa could provide a boost in China and generate ready-to-drink marketing opportunities. Spillane says Coca-Cola has the clearest, best long-term strategy among its peers. Coca-Cola has a 3.4 percent dividend yield, and Bank of America has a “buy” rating and $52 price target for KO stock.
Prudential is one of the largest global diversified life insurance providers, operating primarily in the U.S. and Japan. PRU stock has taken a 14 percent hit in 2018, but that sell-off has pushed the company’s dividend yield up to 3.6 percent. Analyst Jay Cohen says the 2018 weakness is a buying opportunity. Cohen says the company’s track record of solid execution and its exposure to the high-growth business of pension de-risking makes it a safe bet for long-term dividend investors. Bank of America has a “buy” rating and $110 price target for PRU stock.
Camden Property Trust is an apartment real estate investment trust headquartered in Houston. The Houston market makes up about 12 percent of Camden’s total net operating income. In the most recent quarter, Houston property same-store NOI was up 3.7 percent in the aftermath of 2017’s Hurricane Harvey. Camden may not have the extremely high yields that other REITs have, but its 3.3 percent dividend makes it a solid play for income investors. Analyst Juan Sanabria says the Houston market should continue to improve in 2019. Bank of America has a “buy” rating and $104 price target for CPT stock.
Kinder Morgan is one of the world’s biggest midstream energy companies. Analyst Dennis Coleman says Kinder Morgan may soon get a financial boost from the sale of Kinder Morgan Canada assets. Proceeds could be used to reduce Kinder Morgan’s debt as the company works toward its long-term leverage goal of 4.5x. Coleman says Kinder Morgan has already made significant progress in improving its fundamentals in the past five years. Kinder Morgan has a 4.4 percent dividend yield, and Bank of America has a “buy” rating and $23 price target for KMI stock.
It’s been a crazy year for Qualcomm. The company’s potential merger with Broadcom (AVGO) was blocked on national security concerns, and Qualcomm recently abandoned its planned buyout of NXP Semiconductors (NXPI) amid international trade tensions. Backing out of the NXP deal cost Qualcomm a $2 billion termination fee, but it also resulted in a new $30 billion buyback program, which analyst Tal Liani says will help support the stock. Qualcomm has a dividend yield of 3.7 percent, and Bank of America has a “buy” rating and $75 price target for QCOM stock.
WEC Energy is a diversified utility holding company. Wisconsin accounts for 60 percent of WEC’s business, but it also operates in Michigan, Minnesota and Illinois. Dumoulin-Smith says the upcoming Edison Electric Institute conference in early November could be the next catalyst for WEC stock. He is expecting a material increase in spending that could propel the stock higher, particularly in the areas of renewables, energy infrastructure and transmission. WEC has a 3.2 percent dividend, and Bank of America has a “buy” rating and $70 price target for WEC stock.
Federal Realty Investment Trust is a shipping center real estate investment trust with properties along the East Coast, south Florida and California. In August, Federal Realty raised its dividend for the 51st consecutive year, bringing its yield up to 3.3 percent. Analyst Jeffrey Spector says the company’s decision to perform proactive re-leasing in 2017 is starting to positively impact its 2018 metrics. Spector says recent key executive departures are a negative, but the company has a deep bench of talented insiders to fill in. Bank of America has a “buy” rating and $141 price target for FRT stock.
WestRock is a materials company that is the largest producer of the containerboard used for shipping boxes, retail displays, pizza delivery and other uses in North America. WRK stock has plummeted 31 percent in 2018, but analyst George Staphos says the negative sentiment in the market is excessive at this point. Staphos says the stock is a compelling value, and recent survey work suggests solid shipment growth over the next two quarters. The pullback has pushed WestRock’s dividend yield to 4 percent. Bank of America has a “buy” rating and $65 price target for WRK stock.