‘Investors Should Consider Defensive Equities,’ Says JPMorgan; Here Are 2 High-Yield Dividend Names to Consider

S&P Futures

4,130.00

+19.25(+0.47%)

Dow Futures

32,527.00

+141.00(+0.44%)

Nasdaq Futures

12,796.75

+56.00(+0.44%)

Russell 2000 Futures

1,922.90

+9.30(+0.49%)

Crude Oil

88.82

+1.04(+1.18%)

Gold

1,736.60

-4.00(-0.23%)

Silver

19.81

-0.06(-0.28%)

EUR/USD

1.0149

+0.0028(+0.27%)

10-Yr Bond

3.3620

0.0000(0.00%)

Vix

23.61

+0.82(+3.60%)

GBP/USD

1.1709

+0.0028(+0.24%)

USD/JPY

142.2920

-0.5080(-0.36%)

BTC-USD

22,259.98

+24.48(+0.11%)

CMC Crypto 200

524.04

+7.89(+1.53%)

FTSE 100

7,488.87

+15.84(+0.21%)

Nikkei 225

28,614.63

+72.52(+0.25%)

Markets are up in recent sessions, and year-to-date losses have moderated somewhat. The NASDAQ, which has taken the hardest hits this year, is back above 12,200, although still down 22% this year. The S&P 500 has managed to climb back out of the bear market, is above 4,100 now, and its year-to-date loss stands at 14%. Neither index has really tested its June low again in the last two months, and recent trends are upwards.

Writing for JPMorgan, global investment strategist Elyse Ausenbaugh gives a good summary of current conditions: “The Fed is still talking tough on inflation, bond yields remain at or near cycle highs, and the world’s other major economies continue to face profound risks… That said, having had some time to process the risks we’re facing, investors in aggregate don’t seem to have the same sense of ‘impending doom’ that they did a few months back.”

While the sense of doom ‘n gloom may be receding, Ausenbaugh is not recommending a whole-hearted bullish attitude on the part of investors. The strategist comes down solidly in favor of defensive equities for now, saying, “As stewards of capital, that prompts us to continue to focus on more defensive tilts over the next year in the core portfolios we manage.”

JPM’s stock analysts are following the lead of the firm’s strategist, picking out defensive stocks that will add a layer of protection for investors’ portfolios. Their approved defense: high-yield dividend payers, a traditional play, but one that has proven effective over the years. Let’s take a closer look.

AT&T (T)

We’ll start with one of the best-known ‘dividend champs’ in the stock market, AT&T. This company needs little introduction; it is one of the oldest names in telecommunications, and its blue logo is one of the world’s most recognizable trademarks. AT&T has changed over the years, as telegraph and telephone technology has changed; the modern company is a provider of landline telephone services in the US, broadband internet through both fiber-optic and wireless networks, and has made large investments in the North American 5G rollout.

AT&T saw $168.9 billion in total revenues last year. This year, however, its first half result of $67.7 billion is down significantly from the $88 billion recorded in 1H21. The company’s most recent quarterly report, for 2Q22, showed the lowest top line in several years, at $29.6 billion, although earnings remained fairly stable – the diluted EPS of 65 cents was in the middle of the range (57 cents to 77 cents) of the last two years’ quarterly results. The company’s cash flow took a hit in the quarter; free cash flow fell year-over-year from $5.2 billion to $1.4 billion.

On a positive note, the company added over 800,000 postpaid phone accounts, and 300,000 net fiber customers, making 2Q22 one of the company’s best for customer additions. Management attributed the negative cash results to higher corporate expenses related to 5G and to an increase in the number of customers late on bill payments.

Through all of this, AT&T has kept up its quarterly dividend payments. The company has an enviable history of reliability; while it has made adjustments to the dividend to ensure payment, the company has never missed a quarterly payment since it started paying out common share dividends in 1984. The current payment was declared at the end of June and paid out on August 1, at 27.75 cents per share. That annualizes to $1.11 and gives a yield of 6.5%. The yield is more than triple the average found among S&P listed firms, and is high enough to provide a degree of insulation against inflation.

JPMorgan’s Phillip Cusick covers T, and he sees the stock as a sound defensive choice in today’s environment.

“Mobility continues to benefit from strong postpaid phone adds and ARPU is growing. Price increases and the return of roaming revenue should benefit service revenue growth in 2H22, helping offset the loss of 3G shutdown and CAF-II revenue. Margins should be up y/y in 2H22 from service revenue growth, cost savings and steady promotional spending… AT&T remains a very defensive business and should have limited downside,” Cusick opined.

To this end, Cusick rates AT&T shares an Overweight (i.e. Buy), seeing them poised to continue outperforming the overall market, and sets a $23 price target to suggest a 12-month gain of 32%. (To watch Cusick’s track record, click here)

Overall, AT&T shares have a Moderate Buy rating from the analyst consensus. This is based on 17 recent reviews, which break down to 9 Buys and 8 Holds. The stock is selling for $17.38 and its average target of $22.59 implies a 30% gain for the coming year. (See AT&T stock forecast on TipRanks)

Omnicom Group (OMC)

As AT&T could demonstrate, successful branding is necessity in modern business. Omnicom Group lives in that world, providing branding, marketing, and corporate communications strategies for upwards of 5,000 enterprise clients in over 70 countries around the world. The firm’s services include advertising, media planning and buying, direct and promotional marketing, digital and interactive marketing, and public relations. Omnicom saw well over $14 billion in revenue last year, with an income of $2.2 billion.

With two quarters of 2022 behind us, it would seem that Omnicom is on track to match last year’s performance. 1H22 revenues matched last year’s first half at $7 billion, as did diluted EPS, at $3.07. The company recorded these results, described as ‘strong’ by management, despite the known headwinds that have hit the economy this year.

Omnicom declared its most recent dividend payment in July of this year, at 70 cents per common share. The payment will be made on October 12. It’s annualized rate, of $2.80, gives a yield of 4%. Omnicom has kept its payment reliable since 1989, never missing a scheduled payment.

In his review of this stock, JPMorgan’s David Karnovsky writes, “The results in the quarter serve as another data point supporting our view that agencies are operating in a structurally stronger market post-pandemic, and that this should help blunt some of the economic softness potentially ahead… We see the current share price as a good entry point for the longer-term investor as we expect the company to continue to eventually return to a consistent mid- to high-single-digit earnings growth profile, while a healthy dividend provides downside support.”

This is an upbeat stance, and it’s accompanies by an equally upbeat Overweight (i.e. Buy) rating. Karnovsky’s price target of $86 implies a one-year upside potential of 20%. (To watch Karnovsky’s track record, click here)

What does the rest of the Street think? Looking at the consensus breakdown, opinions from other analysts are more spread out. 5 Buys, 4 Holds and 1 Sell add up to a Moderate Buy consensus. In addition, the $80.43 average price target indicates 12% upside potential from the current trading price of $71.53. (See Omnicom stock forecast at TipRanks)

To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Advertisement

TipRanks

Raymond James Says Inflation May Be Easing; Taps 2 Stocks to Buy

The unfortunate buzzword for 2022: inflation. Wherever you go, it has been hard to avoid this hot topic, as inflation has soared to heights not seen in decades, with the central bank eventually declaring it will do all that’s required to tame it. The combination of high inflation, attendant rate hikes and fears of a recession have also spooked the markets which have been on a downtrend for most of the year. With the August inflation reports due this week (CPI on Tuesday & PPI on Wednesday), the

TheStreet.com

It’s Time for Me to Jump Into Intel. Yes, Intel

The Biden Administration had sent letters to Nvidia requiring a license to sell its A100 and H100 chips that are designed to speed machine learning and artificial intelligence to those three regions. Nvidia stated at the time that the restriction likely jeopardized… for the firm, up to $400M in annual revenue. Advanced Micro Devices was similarly informed that a similar restriction would be placed on that firm’s MI250 chips.

The Telegraph

Russia’s cash reserves run dry as West shuns Putin’s energy

UK teeters on edge of recession after ‘feeble’ rebound FTSE 100 jumps 1.3pc; Pound slumps against euro Roger Bootle: We face a succession of Black Wednesdays – but good things can come out of bad Sign up here for our daily business briefing newsletter

Bloomberg

US Inflation Will Guide Fed Readying Next Hike: Eco Week Ahead

(Bloomberg) — US inflation data in the coming week may give the Federal Reserve mixed signals ahead of a potential third-straight jumbo interest-rate hike, with a broad measure of consumer prices likely to simmer down even as a gauge of underlying pressures accelerates. Most Read from BloombergThe World’s Hottest Housing Markets Are Facing a Painful ResetRussian Defenses Crumble as Ukraine Retakes Key TerritoryRussia Confirms Flight of Troops From Ukraine’s Kharkiv AreaCredit Card Firms to Star

Barrons.com

Cathie Wood Says Falling Car Prices Could Mean Trouble

Lower car prices might be cheered by car buyers, but they could also mean the Federal Reserve is pushing too hard against inflation, says ARK Invest CEO Cathie Wood.

Motley Fool

Why Tuesday Could Be a Huge Day for the Stock Market

The stock market has been a fickle place in 2022, with investor sentiment constantly changing by the day, week, and month. The elevated inflation indicators over the past year or so are the main reason the Federal Reserve has had to raise interest rates so intensely this year, which has roiled markets and led to the worst first half of a year for stocks in about five decades. On Tuesday, the U.S. Bureau of Labor Statistics will release more inflation data — in this case, the change in prices for the month of August — which could have a big effect on the stock market.

SmartAsset

Vanguard Gave Out Money This Year. Did You Miss Out?

Investors with Vanguard mutual funds in their portfolios are in line to receive some extra cash later this month. The company announced Friday that extra distributions of capital gains and dividends will be paid to the shareholders of 34 different … Continue reading -> The post Here’s Who Will Get Additional Income From Vanguard This Month appeared first on SmartAsset Blog.

Zacks

Are You Looking for a High-Growth Dividend Stock?

Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Snap-On (SNA) have what it takes? Let’s find out.

Reuters

Fed set for another 75-basis-point rate hike; early pivot unlikely: Reuters poll

The Federal Reserve will deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks, according to a Reuters poll of economists released on Tuesday. Policymakers have done little to push back on market pricing for a third consecutive rate hike of three-quarters of a percentage point at the U.S. central bank’s Sept. 20-21 meeting, with inflation, as measured by the Fed’s preferred gauge, running at more than three times its 2% target. A strong majority of economists, 44 of 72, predicted the central bank would hike its fed funds rate by 75 basis points next week after two such moves in June and July, compared to only 20% who said so just a month ago.

Reuters

U.S. inflation day

Investors get the latest U.S. inflation figures on Tuesday, which will set the seal – or not – on a third consecutive 75 basis point rate hike from the Fed, and set the tone for global markets for the next several weeks. Core inflation is expected to be a little stickier. But that was the consensus forecast before the New York Fed’s latest survey of consumers’ inflation expectations was released on Monday.

Benzinga

A Look At The Startups Jeff Bezos Has Invested In This Year – Most Have This One Thing In Common

While the majority of Jeff Bezos’ $150 billion wealth comes from his stake in Amazon.com Inc., his venture capital company, Bezos Expeditions, is also a contributing factor. In fact, since his retirement as the CEO of the world’s largest e-commerce company, Bezos has been focusing on acquiring startups across different industries, as his hunt for the next big bet continues. From space to real estate, Bezos is seemingly dipping his toes in all types of water. Investments Over the Years Bezos prim

Motley Fool

4 Ultra-High-Yielding Passive Income Stocks To Buy With $1,000

Real estate investing is one way anyone can start making passive income. You don’t need a lot of money to begin investing in income-producing real estate: Congress made it accessible to everyone by creating real estate investment trusts (REITs) in 1960. Four top REITs for those seeking to collect passive income are EPR Properties (NYSE: EPR), STORE Capital (NYSE: STOR), Medical Properties Trust (NYSE: MPW), and W.P. Carey (NYSE: WPC).

Motley Fool

3 Dividend Stocks That Billionaires Warren Buffett and George Soros Both Own

Billionaires buy dividend stocks for the same reasons other people do. Of course, they also prefer that their stocks grow as well as pay dividends. Here are three dividend stocks that billionaires Buffett and Soros both own.

Leave A Reply

Your email address will not be published.