International Paper Co (IP) — In the previous Trade of the Day, I reviewed a very speculative company with potential for a large near-term gain: Weatherford International Plc (WFT). Today, I’m recommending IP stock, a quality blue chip with a high dividend yield that has also been beaten down and presents the opportunity for a solid short-term profit.
International Paper is one of the leading paper and packaging companies in the world. The past year has been tough for the company and IP stock, but International Paper’s size gives it considerable leverage to meet challenges.
While revenue declined 5% in 2015, the company posted its highest operating EPS in 20 years, and Q4 earnings also beat analysts’ estimates.
Analysts at S&P Capital IQ Equity Research, which rate IP stock a “Buy” with a $41 price target, note that International Paper is focusing on better markets and higher-return businesses. For instance, the company sold its 55% equity interest in Chinese joint venture IP-Sun JV and plan to exit the country’s oversupplied box market.
Turning to the chart, IP stock fell from a high just below $58 in February 2015 to a low of $32.50 on Jan. 25, 2016 — a loss of nearly 45% in less than a year. But the high volume on Jan. 25 makes it look like a selling climax.
Last week, IP stock broke up through its long-term bearish resistance line at about $37. Then, on Wednesday, the 20-day moving average crossed up through the 50-day, another favorable sign.
Since the bearish resistance line has been broken, IP stock is now technically a buy, but shares may pull back to the breakout point before proceeding higher. Therefore, look to buy IP stock at $37 with a trading target of $43 for a short-term gain of over 15%.
Long-term buyers should also consider IP stock as a cornerstone holding in its industry for growth and its high dividend yield, which currently sits at 4.6%.