CFRA loves these dividend stocks.
The Federal Reserve has indicated federal interest rates will remain near 0% through at least 2023, limiting income investors’ options for steady, reliable yield. Dividend stocks can be a great source of income, but a dividend is only as good as the company paying it. Many high-yield dividend stocks have significantly underperformed the market in recent years. The ideal solution for long-term investors is to identify stocks that have both sizable dividend yields and significant upside potential as well. Here are nine dividend stocks with at least 3% yields and “strong buy” ratings from the CFRA analyst team.
Broadcom (ticker: AVGO)
Broadcom is a diversified semiconductor company that produces products for the wired infrastructure, wireless communications, industrial and enterprise storage markets. Analyst Angelo Zino says Broadcom should benefit from content gains in 5G devices during the global 5G upgrade cycle. Zino is also bullish on Broadcom’s expansion to infrastructure software, which provides diversification and high-margin recurring revenue. Zino says Broadcom’s heavy reliance on Apple (AAPL) creates risk, but the stock trades at a steep valuation discount relative to peers. Broadcom shares also pay a 3.3% dividend. CFRA has a “strong buy” rating and $390 price target for AVGO stock.
Conagra Brands (CAG)
Conagra Brands is a leading American packaged foods manufacturer and owner of brands such as Banquet, Chef Boyardee and Healthy Choice. Analyst Arun Sundaram says Conagra’s booming business has allowed it to pay down debt, hit its target leverage ratio and even raise its dividend by 29% this year. Walmart (WMT) accounts for about 26% of Conagra’s business, and Sundaram says any momentum for the recently launched Walmart+ subscription service could provide an indirect boost to Conagra. Conagra pays a 3.1% dividend. CFRA has a “strong buy” rating and $44 price target for CAG stock.
Carpenter Technology Corp. (CRS)
Carpenter Technology produces and distributes specialty metals. Analyst Matthew Miller says Carpenter has high exposure to secular growth in the aerospace and medical end markets. The health crisis and grounding of the Boeing 737 Max have created near-term headwinds for Carpenter, but there has been good news on both fronts with coronavirus vaccines advancing and the recent clearance of the 737 Max by the Federal Aviation Administration. Miller is expecting commercial air travel to gradually recover over time. In the meantime, Carpenter pays a 3.3% dividend. CFRA has a “strong buy” rating and $31 price target for CRS stock.
China Life Insurance Co. (LFC)
China Life Insurance is the largest life insurance company in China and has about 20% market share. Analyst Siti Salikin says China Life’s leading market share, impressive distribution network, pricing power, exposure to higher-growth regions and solid balance sheet have the company well-positioned to capitalize on long-term growth in China’s insurance industry. Salikin says China Life’s focus on improving operational efficiency will also boost margins, and CFRA is projecting 13% earnings growth per share in 2021. China Life shares also pay nearly a 4% dividend. CFRA has a “strong buy” rating and $16 price target for LFC stock.
Orange is a leading French telecommunications company, providing telephone, internet, cable television and other services. Analyst Adrian Ng says Orange’s recent cost-cutting initiatives will help support margins, and the sale of its tower assets will provide cash needed for strategic investments. Despite headwinds to roaming and equipment sales due to the health crisis, Orange reported 0.8% year-over-year revenue growth in the third quarter, and Ng is projecting 10% earnings growth in 2021. Orange cut its dividend earlier this year, but its post-cut yield is still 4.1%. CFRA has a “strong buy” rating and $14 price target for ORAN stock.
Most of the recent headlines about Pfizer center on its coronavirus vaccine candidate. Pfizer said this month that its candidate is 95% effective, and the company recently applied for emergency regulatory approval. The vaccine could certainly be a significant catalyst for the stock in the near term, but Pfizer has been a diversified, reliable dividend stock for years now. Analyst Sel Hardy says Pfizer’s oncology drugs and pipeline should help offset declining Lyrica and Enbrel sales and support long-term growth. Pfizer pays a 4% dividend. CFRA has a “strong buy” rating and $50 price target for PFE stock.
Philip Morris International (PM)
Philip Morris International is one of the largest tobacco companies in the world and owner of brands such as Marlboro, Parliament and L&M. Analyst Garrett Nelson says Philip Morris has both an attractive valuation and an impressive 6.3% dividend yield. Tobacco companies are facing a secular decline in global cigarette volumes, but Nelson says pricing gains and emerging market growth will offset those headwinds. In addition, Nelson says Philip Morris’ IQOS heated tobacco device should help the company gain market share from competitors. CFRA has a “strong buy” rating and $95 price target for PM stock.
Sempra Energy (SRE)
Sempra Energy is a California natural gas transmission and distribution company. Analyst Paige Meyer says Sempra has an impressive pipeline of projects that will drive sizable earnings growth once they enter service. In addition, Meyer says Sempra has filed for key rate increases that should contribute to the company’s rate base. Meyer is particularly bullish on the startup of the Cameron liquid natural gas export project. CFRA is projecting 3.6% revenue growth in 2020 and 3.8% growth in 2021. Sempra pays a 3.2% dividend. CFRA has a “strong buy” rating and $158 price target for SRE stock.
Total SE (TOT)
Total SE is one of the world’s largest oil and gas majors. There’s no question 2020 has been a difficult year for the oil industry given the sharp drop-off in oil demand. However, analyst Jia Man Neoh says Total will weather the storm. Total is projecting 2% annual hydrocarbon production growth through 2025. In addition, Total has extremely tight cost controls that allow the company to generate break-even pre-dividend cash flows at Brent oil prices of less than $25 per barrel. Total also pays about a 6% dividend. CFRA has a “strong buy” rating and $38 price target for TOT stock.
Strongly recommended dividend stocks:
— Broadcom (AVGO)
— Conagra Brands (CAG)
— Carpenter Technology Corp. (CRS)
— China Life Insurance Co. (LFC)
— Orange (ORAN)
— Pfizer (PFE)
— Philip Morris International (PM)
— Sempra Energy (SRE)
— Total SE (TOT)
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