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Dividend Stock Advisor

Dividend Stocks Holding Up Relatively Well

By David Peltier | 02/11/16 - 02:12 PM EST
Stocks in Focus: ABBV, QCOM, PFE, SON, SO, CPB, WM, F, HP, LMT, SSI, TMP, COP

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 period.

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 buying opportunities.

Earnings Reviews

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 yield.

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 year.

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 yield.

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 expectations.

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 yield.

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.

Earnings Preview

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 eight quarters.

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 yield.

Company Updates

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 yield.

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.

Dividend Reminders

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.

Regards,

David S. Peltier

Qualifying for 2 Dividends This Week
Stocks in Focus: HP, SO

Helmerich & Payne and Southern investors will qualify.

02/09/16 - 10:19 AM EST
3 Oil Companies in Danger of Cutting Dividends
Stocks in Focus: ENBL, MUR, NGLS

In this lower-for-longer oil price environment, more companies will reduce their shareholder payouts.

02/08/16 - 11:49 AM EST

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