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.
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.
According to the latest CPI (consumer-price index) report, U.S. inflation cooled down slightly from July but not enough to appease the markets. Overall prices rose by 8.3% from the same period a year ago, slowing down from July’s 8.5% uptick and further down from June’s 40-year high showing of 9.1%. On a monthly basis, after plateauing in July, consumer prices rose by 0.1%. As the expectation was for a rise of 8.1% over last year and a drop of 0.1% compared to last month, the markets did what th
Yahoo Finance Video
Hennessy Energy Funds at Hennessy Funds Portfolio Manager Ben Cook joins Yahoo Finance Live to discuss commodity prices, investor positioning, the looming fuel shortage, and the outlook for the global economy.
Even though the Inflation Reduction Act of 2022 is in effect, markets can have a way of determining whether the plan works or not. Not that it’s expected, but if the oil and natural gas markets become even more volatile than they are — with Russia and Europe at odds — it’s a concern if you’re thinking about the possibilities of higher prices. That’s probably the most obvious example of a reason to be considering an inflation hedge as part of a diversified investment plan. It doesn’t look like cr
UPS is delivering for Boeing, helping boost the aircraft maker’s August sales numbers with an order for cargo planes. Boeing said Tuesday that it took orders for 26 planes net last month, with the biggest being a United Parcel Service Inc. order for eight freighters. Arlington-based Boeing also took orders for 13 more 737 Max planes, including two for American Airlines.
American City Business Journals
The return of deliveries of the 787 Dreamliner helped the Boeing Co. increase its handovers of commercial aircraft in August compared to last year. While that bested August 2021 by 13 aircraft, deliveries were still nearly halved from where they were in August 2018 before deliveries of the MAX were halted following two deadly crashes of the jet and well before the industry impact of Covid-19. While the MAX has been back in service from a 20-month safety grounding since late 2020, Boeing (NYSE: BA) is still delivering below its stated production target on the program of 31 aircraft per month.
Goldman Sachs is putting together a plan to lay off employees, according to media reports, becoming one of the first major U.S. big banks to cut workers. Goldman Sachs (ticker: GS ), which could let go of employees as soon as next week, had paused its program of rightsizing the workforce during Covid-19; it would typically lay off 1% to 5% of its employees based on performance and other factors every year, according to the Times. Technology companies were the first to lay off employees.
The price of gasoline has dropped sharply in recent weeks, bringing a welcome relief to anyone with a car, but the fact remains that gas is still up more than $1.50 per gallon, on average, since the beginning of 2021. It’s been a major driver of inflation. And according to the latest numbers, for August, inflation remains high, at 8.3% annually. Much of that number is driven by increases in food and housing costs – but energy prices are also contributing, and this could, longer-term, be a boon f
(Bloomberg) — A semblance of calm returned to markets on Wednesday after the carnage sparked by hotter-than-expected American inflation that prompted investors to reassess the outlook for interest rates and economic growth.Most Read from BloombergUS Inflation Tops Forecasts, Cementing Odds of Big Fed HikeUgly Selloff Pushes Stocks Down Most Since 2020: Markets WrapXi Returns to World Stage With Putin to Counter US DominanceThese Cities Have the Most Millionaires in New RankingTerra Co-Founder D
AT&T Chief Executive John Stankey shot back at the critics who say AT Inc.’s recent growth has been fueled by hefty promotional activity, telling investors at a Monday conference that numerous factors are behind the company’s subscriber momentum.
Some U.S. railroads will start halting crop shipments on Thursday, a day ahead of a potential work stoppage, an agricultural association and sources at two grain cooperatives said on Tuesday, threatening exports and feed deliveries for livestock. Farmers also plan to add fertilizer to fields after the harvest, and shipments of fertilizer are being delayed. Max Fisher, chief economist at the National Grain and Feed Association, which represents most U.S. grain handlers, said rail customers reported at least one railway would stop taking grain shipments on Thursday morning.
You need to reach certain ages before you can unlock benefits like Social Security, Medicare, and even penalty-free access to your retirement funds. Adults 50 and older may make catch-up contributions to their retirement accounts. Prior to 59 1/2, it’s difficult to withdraw funds from your retirement accounts without paying a 10% early withdrawal penalty.
ProSiebenSat.1 Media SE (OTC: PBSFY) slashed its 2022 core earnings outlook after acquiring the remaining 50% of shares in streaming service Joyn from Warner Bros. Discovery, Inc (NASDAQ: WBD). ProSiebenSat will acquire the remaining 50% stake in Joyn, launched in 2019, for the symbolic price of EUR1, ProSiebenSat CEO Rainer Beaujean told Reuters. ProSiebenSat 1 Media expects the complete consolidation of Joyn to make a EUR25 million dent in 2022 adjusted earnings before interest, tax, depreciation,
Traders have been ramping up their 100 basis point bets all day, since the U.S. Labor Department early Tuesday released a hotter-than-expected U.S. August Consumer Price Index report that looked destined to cement an aggressive stance by the Fed. The Federal Open Market Committee will release its policy decision at the close of its two-day meeting next week, on Sept. 20-21.
The big question on investors’ minds right now is, where will inflation go? And the related follow-up question, for everyone, is, how far will the Fed hike rates in response? The potential answers cover the full range of possibilities, from President Biden’s happy talk about ‘zero percent inflation,’ to the market bears predicting a full-blown economic depression. Count Stifel’s market strategist Barry Bannister among the bulls. He’s not convinced by the doomsayers, and sees the recent drop in i