U.S. stocks are trading sharply lower once again
Thursday, although dividend stocks have been holding up
relatively well of late. The iShares Select Dividend ETF
(DVY:NYSE) is up fractionally over the past two weeks,
while the S&P 500 index (SPX) is down 3% over the same
We’re in an environment where we are seeing some extreme
levels in sentiment readings. For one thing, fed funds
futures are pricing in an interest rate cut before the
next potential hike. Bearish sentiment, as measured by
the Investors Intelligence survey is also at the highest
level since March 2009.
More specific to dividends, the average yield on the S&P
500 is 80 basis points higher that the yield on the
benchmark 10-year Treasury. In addition, the stocks of
several notable companies, including model portfolio
holdings AbbVie (ABBV:Nasdaq) and Qualcomm (QCOM:Nasdaq),
are yielding more than their bonds. Both of these data
points harken back to the summer of 2012, which also
proved to be an attractive buying opportunity.
Since our last edition, we sold ConocoPhillips
(COP:NYSE), as management sacrificed its dividend to
maintain an A-level credit rating. We have room to add
new names to the model portfolio on this market decline
and will monitor the latest market pullback for potential
AbbVie (ABBV:Nasdaq) posted better-than-expected
quarterly results on Jan. 29. The company earned $1.13
[er share in the fourth quarter, as revenue increased 17%
year over year, to $6.4 billion. Humira was the main
driver of growth in the period, although currency
impacted sales by 6%. Management is also keeping a tight
lid on costs.
The stock moved 5% lower over the past two weeks and
recently changed hands around $52.25. We maintain that
AbbVie is attractive to purchase for the 4.3% dividend
Pfizer (PFE:NYSE) also announced better-than-expected
quarterly results, on Feb. 2. The company earned $0.53
per share in the fourth quarter, as revenue grew 7% from
a year ago, to $14.05 billion. Currency affected sales by
$934 million in the period, while Ibrance and Prevnar
product revenues exceeded expectations.
Looking ahead to 2016, Pfizer expects EPS of $2.20 to
$2.30 , on revenue of $49 billion to $51 billion, which
is below the previous consensus analyst estimate. The
outlook includes a $2.3 billion headwind from a stronger
U.S. dollar and for management to repurchase $5 billion
of stock in the first half of the year. On the conference
call, management confirmed that the Allergan (AGN:NYSE)
deal remains on track to close in the first half of the
The shares lost 3% over the past two weeks and recently
traded at about $29.00. We continue to believe that
Pfizer is attractive to purchase for the 4.1% dividend
Sonoco Products (SON:NYSE) posted mixed quarterly results
on Feb. 11. The company earned $0.64 per share in the
fourth quarter, which exceeded the consensus analyst
estimate. On the other hand, revenue declined 3% from the
previous year to $1.27 billion and fell short of
Sonoco saw better pricing and demand in the period, which
offset currency and labor cost headwinds. For 2016, the
company projects EPS of $2.64 to $2.74, which is in line
with previous expectations. Management also announced a
new $100 million stock buyback program.
The shares moved 9% higher over the past two weeks and
recently changed hands at around $41.00. We maintain that
Sonoco is attractive to purchase for the 3.4% dividend
Southern (SO:NYSE) announced mixed quarterly results on
Feb. 3. The utility earned $0.44 per share in the fourth
quarter, which exceeded the consensus analyst estimate.
On the other hand, revenue fell 10% year over year to
$3.61 billion and fell short of expectations. The company
saw lower residential demand in the period, because of
warmer winter weather. In 2016, management sees EPS of
$2.76 to $2.88.
The shares were up fractionally over the past two weeks
and recently traded at about $48.25. We believe that
Southern is attractive for the 4.5% dividend yield.
Campbell Soup (CPB:NYSE) is scheduled to report quarterly
results on the morning of Feb. 25. Consensus analyst
estimates see the company posting EPS of $0.72 in the
fiscal second quarter (ended January), up from $0.66 in
the previous year, on $2.2 billion of revenue. Management
has met or exceeded profit expectations each of the past
Management will host a conference call at 8:30 a.m. ET
that shareholders can access at the company’s website.
On the call, we’ll be listening for where retail soup
inventories stand at the end of the cold season.
The shares moved nearly 3% higher over the past two weeks
and recently changed hands at roughly $56.30. We maintain
that Campbell is attractive to hold for the 2.2% yield.
Waste Management (WM:NYSE) will announce quarterly
results on the morning of Feb. 18. The company is
expected to earn $0.68 per share in the fourth quarter,
up from $0.67 a year ago, on $3.29 billion of revenue.
Management has exceeded the consensus analyst profit
estimate seven straight quarters.
Management will host a conference call at 10 a.m. ET that
investors can access at 877-710-6139, using the passcode
21854213. A replay will also be available for two weeks
at 855-859-2056, using the same passcode. Both the live
call and a replay can be accessed at the company’s
website. On the call, we’ll be looking for an
update on industry demand and pricing.
The stock gained fractionally over the past two weeks and
recently changed hands at around $52.70. We believe that
Waste Management is attractive for the 2.9% dividend
On Feb. 2, Ford Motor (F:NYSE) announced that January
U.S. monthly sales fell 2.6% from the previous year. Edge
and van sales were strong for the company in the period,
which is typically the slowest in the industry. On the
conference call, management said that pricing remains
firm and it expects 2016 to be another strong year.
The shares moved 4% lower over the past two weeks and
recently changed hands around $11.15. We maintain that
Ford is attractive to purchase for the 5.35% dividend
Helmerich & Payne (HP:NYSE) lost 5% over the past two
weeks, along with the underlying price of oil and
recently changed hands around $45.00. We maintain stock
is attractive for the 6.1% dividend yield.
Lockheed Martin (LMT:NYSE) gained more than 2% over the
past two weeks and recently changed hands around $207.50.
The company is leveraged to rising defense spending and
we continue to believe that shares are attractive to
purchase for the 3.1% dividend yield.
Stage Stores (SSI:NYSE) fell 10% over the past two weeks
and recently traded at about $7.00. Even so, we maintain
the company’s 8.55% dividend yield is secure.
Lockheed Martin declared its latest quarterly dividend of
$1.65 a share (3.1% yield) on Jan. 28. Investors at the
close of trading on Feb. 25 will qualify for the payment
on March 24.
Sonoco Products announced its next quarterly dividend of
$0.35 a share (3.4% yield) on Feb. 10. Investors at the
close of trading on Feb. 22 will qualify for the payment
on March 10.
Tompkins Financial (TMP:NYSE) declared its latest
quarterly dividend of $0.44 a share (3.3% yield) on Jan.
29. Investors at the close of trading on Feb. 4 will
qualify for the payment on Feb. 16.
David S. Peltier
Helmerich & Payne and Southern investors will qualify.
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