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.
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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:
| Quintile 2 stock | Forward dividend yield | Price target upside from June 8 close |
| Kraft Heinz Co. (ticker: KHC) | 4.2% | 34.4% |
| Equity Residential Properties Trust (EQR) | 4.1% | 13.4% |
| Ventas Inc. (VTR) | 4% | 25.2% |
| CubeSmart (CUBE) | 4.4% | 43.2% |
| M&T Bank Corp. (MTB) | 4% | 12.7% |
| MetLife Inc. (MET) | 3.8% | 37.6% |
| Eastman Chemical Co. (EMN) | 3.9% | 35.5% |
| HF Sinclair Corp. (DINO) | 3.9% | 35.3% |
| UDR Inc. (UDR) | 4% | 18.8% |
Kraft Heinz Co. (KHC)
Kraft Heinz is one of the world’s largest consumer packaged food and beverage companies. Analyst Bryan Spillane says Kraft Heinz’s first-quarter earnings report revealed the company is off to a solid start to the year. He says the report could mark a potential turning point for investor sentiment surrounding the stock. Spillane says Kraft’s foodservice sales, international revenue and “Grow” platforms are generating accelerating growth. In addition, margins are expanding and supply chain issues are subsiding. Kraft Heinz shares also pay an attractive 4.2% dividend. Bank of America has a “buy” rating and $50 price target for KHC stock, which closed at $37.19 on June 8.
Equity Residential Properties Trust (EQR)
Equity Residential is a multi-family residential real estate investment trust (REIT) that owns and operates a diversified portfolio of apartment properties. Analyst Jeffrey Spector says Equity Residential is a top apartment REIT stock pick. The company recently lost its legendary founder and longtime chairman Sam Zell, who passed away in May. However, the company subsequently raised its 2023 earnings per share guidance midpoint from $2.04 to $2.07 and said demand in the New York market has been particularly strong. Equity Residential pays a 4.1% dividend. Bank of America has a “buy” rating and $74 price target for EQR stock, which closed at $65.23 on June 8.
Ventas Inc. (VTR)
Ventas is a health care REIT that invests in health care facilities, including senior housing, hospitals, specialty care facilities and medical office buildings. REITs have been pressured in 2023, but Spector says Ventas’ first-quarter earnings call highlighted potential upside from the company’s move to take ownership of the Santerre Health portfolio through a “loan to own” structure. The portfolio’s medical office building occupancy is just 77% compared to Ventas’ existing medical office building occupancy rate of 89.6%, suggesting plenty of room for improvement. Ventas shares offer a 4% dividend. Bank of America has a “buy” rating and $56 price target for VTR stock, which closed at $44.74 on June 8.
CubeSmart (CUBE)
CubeSmart is a self-storage REIT that acquires, owns, develops and operates U.S. self-storage facilities. Spector says CubeSmart is a high-quality REIT positioned to outperform its peer group thanks to its significant exposure to New York City. Spector says the company has a strong management team and a healthy balance sheet, including the lowest floating rate debt exposure among its peers. He says CubeSmart is positioned to lead storage REITs in earnings growth in 2023, its stock is attractively valued and it pays a 4.4% dividend. Bank of America has a “buy” rating and $64 price target for CUBE stock, which closed at $44.69 on June 8.
M&T Bank Corp. (MTB)
M&T Bank is a U.S. regional bank that operates primarily in the Northeast and Mid-Atlantic regions and focuses on commercial banking, wealth management and investment services. Rising interest rates have weighed on bank loan portfolios and triggered deposit runs that led to the collapse of Signature Bank, Silicon Valley Bank and First Republic. However, analyst Ebrahim Poonawala says M&T is attractively valued and on solid footing to navigate the banking crisis. M&T shares also pay a 4% dividend. Bank of America has a “buy” rating and $145 price target for MTB stock, which closed at $128.61 on June 8.
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MetLife Inc. (MET)
MetLife is a leading diversified U.S. life insurance and financial services company. Analyst Joshua Shanker says MetLife’s disappointing first-quarter earnings numbers were negatively impacted by weak sales in group benefits and the Asia market, as well as a larger-than-expected loss within the corporate segment. Fortunately, Shanker says Latin America sales growth is accelerating and MetLife has a high-quality, diversified commercial real estate portfolio. He says cost savings and share buybacks will continue to support EPS. MetLife shares pay a 3.8% dividend. Bank of America has a “buy” rating and $74 price target for MET stock, which closed at $53.76 on June 8.
Eastman Chemical Co. (EMN)
Eastman Chemical is a global advanced materials and specialty additives company that produces fibers and plastics used in industrial and consumer products. Analyst Matthew DeYoe says chemical market business conditions are near recessionary levels, but Eastman shares are significantly undervalued. DeYoe says Eastman has made significant progress in improving its operations and focusing more on shareholder-friendly capital deployment. He says new recycling ventures could add additional growth opportunities, and he projects a return to revenue growth in 2024. Eastman pays a 3.9% dividend. Bank of America has a “buy” rating and $109 price target for EMN stock, which closed at $80.42 on June 8.
HF Sinclair Corp. (DINO)
HF Sinclair is one of the largest U.S. independent petroleum refiners, operating primarily in the Midcontinent, Southwest and Rocky Mountain regions. Analyst Doug Leggate says HF Sinclair exceeded earnings expectations in the first quarter thanks to higher margin capture in the Western region. In addition, the company recently announced it has made an offer to fully acquire the remaining 47% of Holly Energy Partners LP (HEP), which Leggate says could eliminate “value leakage” due to HEP’s 8.6% distribution yield. HF Sinclair pays a 3.9% dividend. Bank of America has a “buy” rating and $62 price target for DINO stock, which closed at $45.83 on June 8.
UDR Inc. (UDR)
UDR is a multi-family residential REIT that owns nearly 60,000 apartment units in the U.S. In the first quarter, UDR’s net income per diluted share was up 125% year over year. In addition, its funds from operations per diluted share were up 9% from a year ago, while same-store revenue growth was up 9.6% year over year. UDR shares are down 13.3% in the past year, but analyst Joshua Dennerlein says the weakness is a buying opportunity. UDR pays a 4% dividend. Bank of America has a “buy” rating and $50 price target for UDR stock, which closed at $42.09 on June 8.
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The Best Quintile 2 Dividend Stocks to Buy originally appeared on usnews.com
Update 06/09/23: This story was previously published at an earlier date and has been updated with new information.
