The earning season giveth and it also taketh away. For some of the stocks that recently reported, it has been a very rough April. However, with the stock market still very rich, and multiples right at all-time highs, maybe, just maybe, it makes sense to look at the top companies that have suffered some. When you combine a poor or so-so quarter, or even a quarter where numbers are good but the market shuns the sector, with a big dividend payout, you might have the makings of a great total return play.
We screened the Merrill Lynch research database for companies that have reported and posted earnings that either were poorly received or just slightly missed the mark. We found four stocks that are rated Buy, pay at least a 4% dividend and would be good long-term holds for more aggressive growth and income portfolios.
This maker of tobacco products and wine has been hit hard and offers value investors a great entry point. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate.
Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb along with strong share repurchase activity. The board also raised the dividend by 8.2% in 2017.
To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller.
Altria released earnings for its first quarter that rose from the same period last year. The company’s earnings came in at $1.89 billion, or $1.00 per share. This compares with $1.40 billion, or $0.72 per share, in last year’s first quarter. Excluding items, Altria reported adjusted earnings of $1.80 billion or $0.95 per share for the period. Despite the strong report, the stock was hit and now trades near a 52-week low.
Altria investors are paid a hefty 5.11% dividend. The Merrill Lynch price target for the shares is $70, and the Wall Street consensus estimate was last seen at $74.77 The stock closed Thursday’s trading at $54.77 a share.
This blue chip leader may still be offering investors the best entry point in years. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.
IBM’s five major segments are: 1) Cognitive Solutions, 2) Global Business Services, 3) Technology Services & Cloud Platforms, 4) Systems and 5) Global Financing. Analysts cite the company’s potential in the public cloud as a reason for their positive outlook going forward.
For the first quarter, IBM actually beat analyst expectations on both the top line and the bottom line, but Wall Street didn’t take very well to its four-cent miss on expectations for full-year 2018 earnings per share, which to many seemed like a huge overreaction.
IBM shareholders are paid a large 4.28% dividend. Merrill Lynch has $200 price target on the stock, while the posted consensus target is $170.75. The shares closed most recently at $146.72 apiece.