BOSTON (TheStreet) -- Credit Suisse (CS) - Get Report says U.S. stocks will trade within a narrow range. The bank predicts a ceiling of 1,200 on the S&P 500 and a floor of 1,000. It's no wonder the bank is recommending clients purchase dividend stocks. Here are 15 of Credit Suisse's 20 favorites. They are ordered by yield, from big to biggest.
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, Dividend Yield: 2.9%, Forward P/E: 14
, Dividend Yield: 3.0%, Forward P/E: 14
Procter & Gamble
, Dividend Yield: 3.3%, Forward P/E: 15
, Dividend Yield: 3.3%, Forward P/E: 16
Johnson & Johnson
, Dividend Yield: 3.4%, Forward P/E: 13
, Dividend Yield: 3.6%, Forward P/E: 14
, Dividend Yield: 3.9%, Forward P/E: 13
, Dividend Yield: 4.2%, Forward P/E: 14
American Electric Power
, Dividend Yield: 4.6%, Forward P/E: 12
, Dividend Yield: 4.7%, Forward P/E: 13
, Dividend Yield: 4.8%, Forward P/E: 15
, Dividend Yield: 4.8%, Forward P/E: 14
, Dividend Yield: 5.5%, Forward P/E: 13
, Dividend Yield: 5.5%, Forward P/E: 14
, Dividend Yield: 6.0%, Forward P/E: 14
Now, here's a closer look at the five cheapest from Credit Suisse's dividend-stock list.
sells cigarettes, including the Marlboro brand, wines and smokeless tobacco. Third-quarter profit rose 28% to $1.1 billion, or 54 cents a share, as revenue ascended 3.3% to $4.5 billion. The operating margin rose from 39% to 41%.
Altria carries $1.7 billion of cash and $12 billion of debt, converting to a lofty debt-to-equity ratio of 2.4. Altria's stock trades at a trailing earnings multiple of 14, a forward earnings multiple of 12, a book value multiple of 10 and a sales multiple of 3.1 -- 12%, 14%, 32% and 17% discounts to tobacco peer averages.
Of analysts following Altria, six rate its stock "buy" and 10 rate it "hold." None rank the shares "sell." A median target of $25.14 suggests that the stock is just below fair value. Bullish forecaster
predicts that the stock will gain 8% to $27.
expect a rise to $26. Altria pays a quarterly dividend of 38 cents, translating to an annual yield of 6.1% with a payout ratio of 80%.
Altria has a record of regular dividend increases. Its one-year dividend growth is 9.2%.
sells pharmaceutical, diagnostic and nutritional products. Its third-quarter profit tumbled 40% to $891 million, or 57 cents a share, hurt by restructuring costs. Excluding one-time items, earnings per share gained 14%. The operating margin rose from 23% to 24%.
Balance-sheet data isn't available for the latest period, but Abbott held $8.7 billion of cash and $16 billion of debt in the second quarter. Its stock sells for a forward earnings multiple of 11 and a sales multiple of 2.4, 18% and 20% discounts to industry averages.
Of researchers covering Abbott, 17 advocate purchasing its shares and six recommend holding them. None suggest selling. A median target of $61.36 suggests a 12-month return of 16%. Bullish forecaster
expects Abbott's stock to advance 51% to $80.
offers the next highest target, at $68, implying 28% of potential upside.
Abbott pays a quarterly dividend of 44 cents, equal to an annual yield of 3.3% with a reasonable payout ratio of 57%. Abbott sports a three-year dividend growth rate of 11% and a five-year growth rate of 9.7%.
is an integrated telecommunications company. Third-quarter earnings per share surged to $2.08 from 55 cents, elevated by one-time gains from a tax settlement and asset sale. Adjusted earnings rose marginally to 55 cents. Revenue inched up 2.8%. Wireless churn dropped to 1.3%, an all-time low, and wireless subscribers rose to 93 million, helped by AT&T's still-exclusive relationship with
AT&T's stock trades at a forward earnings multiple of 11 and a book value multiple of 1.6, 21% and 39% discounts to telecom peer averages.
Of analysts covering AT&T, 20 rate its stock "buy" and 13 rate it "hold." None rank it "sell." Still, ongoing rumors that
will add the iPhone to its product line-up threatens AT&T's business model.
expects AT&T's stock to appreciate 24% to $35.
FBR Capital Markets
expects a rise to $34.
AT&T pays a quarterly dividend of 42 cents, translating to an annual yield of 5.9% and a payout ratio of 78%. AT&T has a three-year dividend growth rate of 5.8% and a five-year growth rate of 5.4%. Its shares have climbed 1.1% so far in 2010.
sells pharmaceuticals. It is due to release third-quarter results Oct. 29. Second-quarter net income fell 52% to $752 million and earnings per share tumbled 67% to 24 cents, hurt by one-time charges. Non-GAAP earnings rose from 83 cents to 86 cents. Revenue soared 92% to $11 billion. The operating margin rose from 28% to 31%.
Merck has $9.9 billion of cash and $18 billion of debt. Its stock trades at a forward earnings multiple of 8.6 and a book value multiple of 2.1, 29% and 63% discounts to pharma industry averages.
Of researchers following Merck, 17 advise purchasing its shares, nine recommend holding and none suggest selling. A median target of $40.33 implies that the stock will return 9.9% in the 12 months.
offers a target of $48, suggesting a 31% gain.
expects Merck's stock to rise to $45.
Merck pays a quarterly dividend of 38 cents, translating to an annual yield of 4.1% and a payout ratio of 35%. Merck has kept its dividend steady at 38 cents since 2004. Its stock has advanced 0.4% in 2010 and 12% in the past 12 months. It is a favorite of value investors.
sells pharmaceuticals. Its third-quarter profit increased 38% to $1.3 billion, or $1.18 a share, as revenue inched up 2% to $5.7 billion. The company's gross margin widened from 80% to 83% and its operating margin stretched from 20% to 30%.
Quarterly balance-sheet data isn't yet available, but Lilly held $5.2 billion of cash and $6.9 billion of debt at the end of the second quarter. Its stock sells for a forward earnings multiple of 8.2, a book value multiple of 3.9 and a cash flow multiple of 6.4, 40%, 31% and 50% discounts to industry averages.
Of analysts covering Eli Lilly, three rate its stock "buy", 14 rate it "hold" and seven rank it "sell." A median price target of $35.72 suggests that the stock is fully valued. Bullish forecaster
offers a target of $43, implying 21% of upside.
predicts that Lilly's stock will advance 10%.
Lilly pays a quarterly dividend of 49 cents, converting to an annual yield of 5.5% with a payout ratio of 49%. Lilly has a three-year dividend growth rate of 5.4% and a five-year rate of 5.6%. Its stock is flat in 2010. It has delivered an annualized loss of 14% since 2007.
-- Written by Jake Lynch in Boston.
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