Between August’s bloodbath, September’s historical volatility and uncertainty over the Federal Reserves’ planned rate hike, investors are looking for income to make it through the fall.
The carnage out on the markets coupled with portfolios’ chock full of downside exposure even makes a decent dividend yield look attractive. Which is why we employed our Behavioral Valuation models to uncover stocks that are under loved by the market based on technical and sentiment analysis.
This is important in markets like this, as under-loved usually translates into lower volatility as there are fewer potential sellers already in a stock, reducing selling pressure.
This week’s scan for top “1 percent” dividend stocks identified the following three companies that are positioned not only as nice dividend yielders, but also strong growth candidates for the last quarter of the year.
The “1 Percent” in Dividend Stocks: Lockheed Martin (LMT)
Dividend Yield: 2.9%
Lockheed Martin (LMT) 2.9% yield and 5% year-to-date performance should put the company on everyone’s radar, but that’s not the case.
According to our data, only 41% of the analysts covering the stock rank it a “buy,” below the average for S&P 500 stocks of just under 60%.
LMT continues to rake in contracts for new military hardware, which should bolster earnings per share, making the price earnings ratio of 16 attractive and relatively cheap.
Technicals will help support shares through the seasonal volatility and help LMT hit our year-end target of $220.
The “1 Percent” in Dividend Stocks: Darden Restaurants (DRI)
Dividend Yield: 3.2%
Darden Restaurants (DRI) is a name that slips below most dividend radars, but not our “1 percent” dividend stock list.
DRI shares are yielding 3.2%, while returning more than 17% year-to-date. The Street should be all over these stats, but they’re not, as only 33% of analysts currently rank DRI a “buy.”
After some reorganization, DRI has increased year-over-year revenue and beat analyst’s earnings expectations for the last three quarters. Fundamental strength will combine with the DRI’s strong technical trends to give DRI stock a boost through the year’s end.
We’re expecting Wall Street to start shifting their view on this “1 percent” dividend stock, possibly after the upcoming earnings report on Sept. 22, resulting in upgrades and higher prices.
Watch for DRI to move towards a target of $80.
The “1 Percent” in Dividend Stocks: Cincinnati Financial (CINF)
Dividend Yield: 3.5%
Insurance companies are among the financials that typically benefit from slowly increasing interest rates, so the current environment is a positive for Cincinnati Financial (CINF).
CINF shares are trading about 17 basis points higher year-to-date, which doesn’t sound amazing, but it beats the broader market, which is showing a loss of about 7% as of this writing.
Short sellers and the analyst community appear to hate this performance, as short interest remains relatively high and absolutely none in the analyst community are covering CINF with a “buy” recommendation.
Cincinnati Financial’s earnings growth and forecast have both been better than their peers within the industry, building a solid fundamental argument for holding this dividend stock as a portfolio builder.
Our current target of $60 is icing on the cake for this 3.5% dividend stock.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.