For years analysts and portfolio managers have anticipated the return of value stocks as the market has moved higher, and for years they have continued to underperform growth stocks. However, that appears to be changing. Almost every metric from valuations to earnings for the growth arena have started to roll over some, especially in the major tech results this week.
Value stocks are typically defined as shares of a company with solid fundamentals priced below those of its peers, based on analysis of price/earnings ratio, yield, and other factors. The BofA Securities Value 10 portfolio is quantitatively generated and is based on the firm’s proprietary BofA Securities metrics versus consensus earnings surprise model plus three additional screening criteria. The universe the analysts use is the Standard & Poor’s 500.
We screened the Value 10 portfolio for the five stocks with the highest dividends. We found five top picks that could be big winners in the second half of 2022. While all are rated Buy at BofA Securities, it’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This top utility stock makes good sense now for conservative accounts. Exelon Corporation (NYSE: EXC) a utility services holding company, engages in the energy generation, delivery, and marketing businesses in the United States and Canada. It owns nuclear, fossil, wind, hydroelectric, biomass, and solar generating facilities.
The company also sells electricity to wholesale and retail customers; and sells natural gas, renewable energy, and other energy-related products and services. Additionally, it is involved in the purchase and regulated retail sale of electricity and natural gas; and transmission and distribution of electricity, and distribution of natural gas to retail customers.
Exelon offers support services, including legal, human resources, information technology, financial, supply management, accounting, engineering, customer operations, distribution and transmission planning, asset management, system operations, and power procurement services. It serves distribution utilities, municipalities, cooperatives, and financial institutions, as well as commercial, industrial, governmental, and residential customers.
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Investors are paid a solid 3.04% dividend. BofA Securities has a $53 target price. The consensus target is posted at $49.29. The stock was last seen Wednesday at $44.46.
Despite the huge rally in oil, this mega-cap energy leader trades at levels printed in 2019 and offers investors an excellent entry point. Exxon Mobil Corporation (NYSE: XOM) is the world’s largest international integrated oil and gas company that explores for and produces crude oil and natural gas in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania.
Exxon Mobil also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products; and transports and sells crude oil, natural gas, and petroleum products.
Top Wall Street analysts expect the company to remain a key beneficiary in this higher oil price environment. Most remain very positive around the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery. They believe ExxonMobil offers greater downstream/chemicals exposure relative to peers.
The company pays investors a solid 3.84% dividend, which will continue to be defended. BofA Securities has a Buy rating and a massive $120 price target for the stock. The Wall Street consensus is set much lower at $103.36. Exxon closed trading Wednesday at $91.57.
Hartford Financial Service
This insurance giant is a dependable idea for conservative investors, and offers incredible value at current trading levels. The Hartford Financial Service Group, Inc. (NYSE: HIG) provides insurance and financial services to individual and business customers in the United States, the United Kingdom, and other countries.
Its commercial lines segment offers workers’ compensation, property, automobile, liability, umbrella, bond, marine, livestock, and reinsurance; and customized insurance products and risk management services. These include professional liability, bond, surety, and specialty casualty coverages. These are offered through regional offices, branches, sales and policyholder service centers, independent retail agents and brokers, wholesale agents, and reinsurance brokers.
The company’s personal lines segment provides automobile, homeowners, and personal umbrella coverage through direct-to-consumer channels and independent agents. Its property and casualty other operations unit offers coverage for asbestos and environmental exposures. The company’s group benefits segment provides group life, disability, and other group coverages to members of employer groups, associations, and affinity groups. These are offered through direct insurance policies; reinsurance to other insurance companies; employer paid and voluntary product coverages; disability underwriting, administration, and claims processing to self-funded employer plans; and a single-company leave management solution. This unit distributes its group insurance products and services through brokers, consultants, third-party administrators, trade associations, and private exchanges.
The Hartford funds segment offers investment products for retail and retirement accounts; exchange-traded products through broker-dealer organizations, independent financial advisers, defined contribution plans, financial consultants, bank trust groups, and registered investment advisers; and investment management and administrative services, such as product design, implementation, and oversight.
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Shareholders are paid a decent 2.38% dividend. BofA Securities has a $90 target price versus the $84.71 consensus price objective The last trade on Wednesday was posted at $64.34.
This is an extremely diversified energy company that has a long and successful operating history and has backed up nicely for investors looking for solid entry points. Phillips 66 (NYSE: PSX) operates through four segments: midstream, chemicals, refining, and marketing and specialties (M&S). Phillips 66 holds many of these assets within its master limited partnership Phillips 66 Partners.
The company is able to benefit from the tax-advantaged structure while still running a more diversified operating business that also contains many assets that aren’t ideal MLP assets. These include its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.
Phillips 66 remains a top idea across Wall Street banks with refining coverage, and many continue to see headroom for incremental capital returns from the company this year, and are very constructive on a positive rate of change at refining in 2022. In addition, most analysts continue to see attractive non-refining value in midstream, marketing, and chemicals.
Investors are paid a very solid 4.51% dividend. The BofA Securities analysts have a price target for the shares at $123, which compares with the lower consensus target posted lower at $115.46. The stock closed Wednesday trading at $88.34.
This disk drive giant posted so-so results for the quarter, but is offering an incredible entry point at current trading levels. Seagate Technology Holdings plc (NASDAQ: STX) provides data-storage technology and solutions in the United States, Singapore, the Netherlands, and other nations.
The company offers hard-disk and solid-state drives, including serial advanced technology attachment, serial attached SCSI, and non-volatile memory express products; solid state hybrid drives; and storage subsystems. Its products are used in enterprise servers and storage systems; and edge compute and non-compute applications.
Seagate also provides an enterprise data solutions portfolio comprising storage subsystems and mass capacity optimized private cloud storage solutions for enterprises, cloud service providers, and scale-out storage servers and original equipment manufacturers (OEMs). In addition, Seagate offers external storage solutions under the Seagate Backup Plus and Expansion product lines, as well as under the LaCie and Maxtor brands in capacities up to 16 terabytes.
The company posted mixed second-quarter results due to customer inventory build-ups, some delayed projects and slowing demand from the company’s legacy customers and consumer markets.
Shareholders enjoy a big 3.66% dividend. BofA Securities reiterated a Buy rating on the shares while lowering their target price to $110 from $120. The consensus target was not available. The last trade Wednesday hit the tape at $78.68 up close to 4%.
Five quality blue-chip companies that look poised to stand tall when the market sell-off returns and all five all pay dependable dividends. All of these companies are leaders in their respective sectors and offer worried investors a good place to move capital from higher beta names, especially with the chance to sell into what is likely a big bear market rally.
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