Large-cap stocks are those that have a market capitalization above $10 billion and are synonymously known as big cap stocks. A company’s market capitalization is calculated by multiplying the share price by the number of shares outstanding. By that metric, all of the shares listed below qualify as large cap. Each stock listed below also pays out a dividend, providing shareholders with a dependable source of income.
May is a great month to buy these companies despite the old adage to “sell in May and go away.” There may be a historical precedent for weaker performance during the summer, but investors in these dividend-paying large-cap stocks generate passive income year round. Investors who choose to direct their capital into the safety of large-cap dividend stocks should consider doing so right now, at least in these names.
Broadcom (NASDAQ:AVGO) is a semiconductor and infrastructure software solutions firm with a strong history. It is indeed among the group of large-cap stocks, boasting a market cap north of $250 billion. Broadcom designs, develops, and sells its software well. This is reflected in the company’s strong fundamentals and valuation metrics, which I think make it a company worthy of investment.
Although it is currently earnings season, Broadcom actually released its results two months ago. Earnings were strong, and the market reacted in kind, sending share prices from $598 to around $630 overnight. That would have been a better time to establish a position, but now is as good a time as any. That’s partly because the company’s share price has since sunk back down toward the $610 level, significantly below the average analyst target price above $700.
In short, Broadcom grew its revenue 16% on a year-over-year basis. This enabled the company to repurchase shares and provide a decent outlook for 8% growth in Q2.
Broadcom is still working to acquire VMWare, which is likely to spike its stock price closer to that $700 level if it goes through.
There’s good reason to believe Raytheon (NYSE:RTX) stock could move $10 higher toward its target price in the coming months. The defense company released Q1 results on April 25 which showed investors a strong, predictable firm with good prospects.
Raytheon reported 10% overall sales growth along with 10% organic growth. So, why should RTX stock be expected to grow now? I think the answer to that question relates to a few key factors. For one, demand for its products and services is high. The company has a record $180 billion backlog and a book-to-bill ratio of 1.25. Book-to-bill is a comparison of booked orders relative to those that have been processed and are ready to bill.
Those figures seem to vindicate the general idea that defense spending is trending upward as geopoltical tensions rise. Raytheon reduced its dividend in 2021, but has since increased it twice. The dividend yields a modest 2.2% currently and is at a healthy payout range.
Linde (NYSE:LIN) also pays a modest dividend, but is a company that has a more reliable track record than Raytheon’s. Currently, LIN stock yields 1.4%, and was last reduced in 1996. Linde is an industrial gases firm with a global footprint and serves multiple end markets from chemicals & energy, to healthcare, manufacturing and more.
Linde’s Q1 earnings report was quite satisfactory overall. Although sales were flat at $8.2 billion and up only 3% year-over-year, the period was strong overall. Operating profit increased by over 16%, reaching $2 billion. However, earnings per share was where Linde really shined. The company delivered earnings per share of $3.42, well beyond the highest end of the analyst range. In fact, it was the fourth straight quarter in which Linde’s EPS exceeded analysts’ predictions.
Linde’s continued strong earnings performance suggests that it has strong upside potential over the long-term.
Now is the time to invest in AbbVie (NYSE:ABBV), even as Humira sales decline sharply. The blockbuster rheumatoid arthritis drug accounted for $5.587 billion of AbbVie’s $12.23 billion in sales during Q1. However, sales also declined sharply for the drug, falling 25.2% year-over-year.
That led to an overall sales decline at AbbVie of 9.7%. None of this sounds particularly positive. AbbVie relies on Humira, which is losing patent protection for a large portion of its business. A predictable decline is occurring as expected.
But there’s a caveat here. AbbVie’s sales were slightly above those expected on Wall Street. The earnings beat, though small, suggests AbbVie is strategically doing what it should be, in promoting the other parts of its portfolio and pushing for greater sales and market share.
AbbVie didn’t do worse than expected, but investors simply didn’t care to see Humira sales soften, although everyone knew they would. The markets were being irrational when they dinged ABBV stock for these results, meaning there’s an opportunity for keen investors.
Hershey (NYSE:HSY) stock informs investors why any sort of business improvement is positive, no matter how it comes. Let me explain.
Hershey currently expects sales to decline by 8% in 2023 after releasing Q1 earnings on April 27. Additionally, the company expects its earnings per share to shrink by 15%. This is a case of seemingly bad news being good news.
An 8% decline in 2023 sales is an upward adjustment to the high end of Hershey’s previous range. That is also true for its earnings per share figures. Indeed, this appears to all be a result of strong consumer demand that resulted in a revenue increase of 12.1% (12.2% organic) in Q1, with overall revenue reaching $2.898 billion. Net income also came in at $587.2 million, up 10.9%.
These strong results are attributable to the fact that consumers remain willing to pay more for everyday items. That truth has been evident across the market as earnings continue to come in and companies continue to report the same idea that consumers are still willing to absorb higher prices.
Mastercard (NYSE:MA) is a dividend-paying stock to consider buying right now. Notably, MA stock pays a very modest 57 cent dividend that yields 0.6%. Admittedly, that isn’t a particularly compelling reason to buy. Investors don’t really buy this stock for its dividend – it’s the company’s growth profile that continues to shine.
Indeed, Mastercard is a smart choice right now for a different set of reasons. Consumer spending remains very strong for one. Mastercard notes as much in its earnings report. Management also notes that cross-border travel continues to strengthen given the company further tailwinds.
But at the same time, that’s all a positive spin on a bitter truth. American credit card debt is spiraling out of control. It reached $986 billion in total in Q4, up by $61 billion in Q3. American consumer spending benefits Mastercard tremendously as balances rise. The bill is going to come due, and Mastercard will likely be one of the primary beneficiaries.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) continues to be a strong pick among large-cap dividend stocks.
The insurance and healthcare provider’s better-than-expected first quarter results reaffirm that idea. The company’s earnings per share of $6.26 beat expectations by 10 cents. Likewise, the company’s medical loss ratio, at 82.2%, came in lower than expected. That means the company paid fewer medical care premiums overall, in turn contributing to stronger earnings per share figures.
UnitedHealth Group’s dividend is rock-solid, yet modest. Currently, UNH stock yields only 1.35%, but was last reduced in 1990. Let’s run some hypothetical math here to understand the real beauty of UNH stock as an investment. Shares currently trade for $492 but have a target price of $596. Assuming dividends remain the same for the next year an investor could reasonably expect their $492 to be worth $602.60 if analysts are correct ($596 + 1.65(4)). That equates to a 22.47% return. That’s an excellent return over a 12 to 18 month period.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.