These are Jefferies ‘rock-solid’ dividend stock picks
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When searching for income, investors may want to consider “rock solid” stocks that not only focus on dividends but avoid certain risks, according to Jefferies. The firm is expecting steady growth in shareholder payouts, with dividends in the U.S. growing an anticipated 5% this year and 5.6% in 2024, the firm’s global head of microstrategy, Desh Peramunetilleke, wrote in a note Friday. “Despite the concerns about higher rates, US dividends have been rising steadily, reaching US$614bn ([trailing 12 months], not adjusted for float), and US$1.5tn including buybacks,” he said. Right now, few dividend stocks can compete with the attractive yields in the Treasury market. However, the Federal Reserve is expected to hike interest rates one more time this year, and then begin cutting them sometime in 2024. Dividend stocks, meanwhile, can continue raising their payouts. Investors also get the stock appreciation, as well as the risks involved with equities. To determine its rock-solid dividend picks, Jefferies looked at companies in the MSCI USA Index with sustainable dividend and buyback yields. The firm then removed various risks such as unsustainable dividends, weak balance sheets, poor cash flow, poor earnings visibility and value traps. Here are 10 names that made the cut. Apple is the largest company on the list, with a 3.5% total yield, which is its 12-month forward dividend yield and its last 12-month buyback yield. The tech giant, which just released its latest iPhone, has a current dividend yield of 0.6% and is known for its stock buybacks. Shares have pulled back in recent weeks after Apple forecast a decline in revenue for the September quarter. Still, the stock is up 32% year to date. Shares of Nike , on the other hand, got a boost from its latest earnings report, which came after the bell Thursday. Earnings per share came in at 94 cents, topping the 75 cents expected from analysts polled by LSEG, formerly known as Refinitiv. While revenue missed expectations, the stock rallied more than 6% in midday trading. The sneaker and apparel giant has been facing headwinds of late due to high inflation and consumers hesitant to spend on footwear and apparel. Shares are down about 18% so far this year. The stock has a 12-month forward dividend yield and last 12-month buyback yield totaling 5.5%. Its current dividend yield alone is 1.4%. Charles Schwab enjoys a total yield, including dividend and buyback, of 9.6%. Its current dividend yield is 1.8%. The brokerage firm is expected to announce its latest quarterly results in mid-October, but it beat expectations when it reported second-quarter earnings and revenue in July. Lastly, First Citizens Bancshares has a dividend and buyback yield total of 6.3%. Shares are up nearly 84% year to date, helped by its purchase of the failed Silicon Valley Bank’s deposits and loans earlier this year. Morgan Stanley recently initiated coverage of the stock with an overweight rating and an $1,850 price target for December 2024, suggesting 35% upside from Thursday’s close. — CNBC’s Michael Bloom contributed reporting.
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