Wall Street pros have been taking a careful look of the stock markets in light of the recent gains. The S&P 500 was up 5.5% by the end of July, and the gains have continued into August.
CFRA strategist Sam Stovall sees conditions as overbought, and believes that investors are in for a shock between now and the end of September – in the form of a 5% to 10% sell-off.
Stovall cites a number of factors to support his contention that we’re on the verge of a market cliff, including “tech and large-cap dominance, the concerns surrounding soaring gold prices, the falling dollar, [and] historically low interest rates…” Stovall looks back at his 35 years’ experience on Wall Street, and notes that he typically sees the S&P average drop 1% in August. 2020 is hardly a typical year, however, and Stovall believes the downward pressures will be correspondingly greater.
The upshot is, while increased volatility is almost certainly going to stay with us for a while, it’s time to consider defensive stocks. And that will bring us to dividends. By providing a steady income stream, no matter what the market conditions, a reliable dividend stock provides a pad for your investment portfolio when the share stop appreciating.
TipRanks database to pull up three dividend stocks yielding 5% or more, with a Strong Buy consensus rating and over 20% upside potential.” data-reactid=”20″>With this in mind, we’ve used the TipRanks database to pull up three dividend stocks yielding 5% or more, with a Strong Buy consensus rating and over 20% upside potential.
VALE)” data-reactid=”21″>Vale SA (VALE)
The first stock on our list is a major Brazilian mining company. Vale has an international presence, is the world’s largest iron ore and nickel producer, and fourth-largest producer of manganese. The company also produces coal and copper and operates major logistic networks in Brazil, China, Indonesia, Malaysia, and Mozambique.
After a deep hit in Q1, Vale saw Q2 profits surge. Earnings more than tripled, from 7 cents per share in the first quarter to 22 cents in the second – although the EPS did come in below the forecast. Net profit for the quarter was $955 million, a strong result that allowed the company to resume its dividend payment. Rising prices for iron ore, and a favorable currency exchange regime, underlay Vale’s successes in Q2.
The resumed dividend was announced at 59 cents per common share, giving the stock a dividend yield just over 5%. This compares favorably to the ~2% average found on S&P listed companies, and should be a clear attractions for VALE shares.
Tyler Broda notes the company’s potential as a dividend cash cow in the current metals markets, writing, “VALE’s restarted dividend now allows for sizable cash returns even if iron ore prices tumble back to earth. Should they stay higher, the cash return/buyback potential of VALE is unrivaled…” The analyst added, "We have increased our target EV/EBITDA multiple to 5.5x from 5.0x as we expect VALE’s shares will rerate as the cash returns and buybacks start to generate industry leading returns."” data-reactid=”25″>RBC analyst Tyler Broda notes the company’s potential as a dividend cash cow in the current metals markets, writing, “VALE’s restarted dividend now allows for sizable cash returns even if iron ore prices tumble back to earth. Should they stay higher, the cash return/buyback potential of VALE is unrivaled…” The analyst added, “We have increased our target EV/EBITDA multiple to 5.5x from 5.0x as we expect VALE’s shares will rerate as the cash returns and buybacks start to generate industry leading returns.”
click here)” data-reactid=”26″>Broda’s confidence is shown in his Buy rating and $16 price target, implying a 43% one-year upside to the stock. (To watch Broda’s track record, click here)
See Vale stock analysis on TipRanks)” data-reactid=”27″>The Wall Street consensus rating on VALE is a Strong Buy, and it’s unanimous – the stock has received 9 Buy ratings in recent weeks. The shares are selling for $11.21, and the $14.24 average price target suggests it has room for 27% growth in the coming year. (See Vale stock analysis on TipRanks)
CVX)” data-reactid=”40″>Chevron Corporation (CVX)
Next on our list is Chevron, the oil giant. Chevron, with a market cap of $163 billion, has sufficient resources to survive the current low-price oil markets and general economic crisis. The company saw earnings turn negative in Q2, falling from $1.29 per share in Q1 to the current $1.59 per share loss. Even with that dismal result, Chevron was able, in July, to enter into a $5 billion all-stock deal to acquire Noble Energy.
In addition to a major acquisition, Chevron has maintained its dividend during the crisis. The company pays out $1.29 per share of common stock, a level that has been stable for three quarters. The company has history of raising the dividend payment after every fourth quarter. The current payment was declared on July 29, for payment on September 10. The yield, at 5.9%, is excellent by any standard.
Phil Gresh, of JPMorgan, likes what he sees in CVX, and rates the stock a Buy. His $109 price target implies the stock has room for a 27% upside this year. (To watch Gresh’s track record, click here)” data-reactid=”43″>4-star analyst Phil Gresh, of JPMorgan, likes what he sees in CVX, and rates the stock a Buy. His $109 price target implies the stock has room for a 27% upside this year. (To watch Gresh’s track record, click here)
In his comments, Gresh supported his stance: “[The] company has an attractive global asset base with best-in-class cash margins and an enviable position in the Permian, in our view. Following the multi-year improvement in FCF … CVX remains in a good position to maintain a low dividend coverage breakeven ($45-50/bbl Brent) and a strong balance sheet…”
See Chevron stock analysis on TipRanks)” data-reactid=”45″>Overall, Chevron stock is selling for $86.03, and the average price target of $106.54 suggests it has a 24% upside in the coming 12 months. The stock holds a Strong Buy analyst consensus rating, based on 11 Buys and 3 Holds. (See Chevron stock analysis on TipRanks)
SNV)” data-reactid=”54″>Synovus Financial Corporation (SNV)
Last on our list today is Synovus, a financial services company offering investment, commercial, and retail banking services, and holding $54 billion in assets. The company has a strong presence in the Southeast, a major growth region in the US, with 294 bank branches and 335 ATM machines in Tennessee, South Carolina, Georgia, Alabama, and Florida.
Synovus has felt the impact of the corona crisis, with earnings falling 77% in Q1, but it has also felt the gains as the economy has begun to reopen. Q2 EPS turned upwards, gaining 9.5% sequentially. The share price, however, remains low; SNV is still down 42% from pre-market crash levels.
Through all of this, Synovus has kept up its dividend. The payment was raised in Q1, on schedule, and the Q2 payment went out in June. The common stock dividend, at 33 cents, annualizes to $1.32 and gives a robust yield of 6.5%.
Brad Milsaps, writing from Piper Sandler, likes what he sees in Synovus, noting: “[We] still view it as a name with room to move higher considering it trades at just 77% of tangible book value. The dividend seems safe for now, while we continue to project that the company will earn the dividend through 2021." Milsaps added, “For now and given the uncertain economic environment, we would rather be conservative and model on the lower end of expected outcomes… However, we think the stock is simply too cheap relative to the risk that could arise from its loan portfolio related to the virus…”” data-reactid=”58″>Brad Milsaps, writing from Piper Sandler, likes what he sees in Synovus, noting: “[We] still view it as a name with room to move higher considering it trades at just 77% of tangible book value. The dividend seems safe for now, while we continue to project that the company will earn the dividend through 2021.” Milsaps added, “For now and given the uncertain economic environment, we would rather be conservative and model on the lower end of expected outcomes… However, we think the stock is simply too cheap relative to the risk that could arise from its loan portfolio related to the virus…”
click here)” data-reactid=”59″>Milsaps backs his stance with a Buy rating. He gives the stock a $41 price target, suggesting a strong 103% upside potential for the coming year. (To watch Milsaps’ track record, click here)
See Synovus’ stock analysis on TipRanks)” data-reactid=”60″>Synovus has a Strong Buy rating from the analyst consensus, with 5 recent reviews breaking down to 4 Buys and 1 Hold. Shares are priced at $20, and the average price target, at $25.75 implies an upside potential of 29%. (See Synovus’ stock analysis on TipRanks)
Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.” data-reactid=”69″>To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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