Summary
- Intel
INTC , AT&T
T , Walgreens
WBA , T. Rowe Price and Western Union
WU are offering high dividend yields currently.
As market volatility continues on the back of a disappointing start to tech companies’ earnings, rising interest rates and rampant inflation, many investors are looking for some stability in their portfolios.
One strategy they can use to hedge their investments against inflation and other headwinds is to look for stocks that pay dividends while prices are down. While there is always a risk of the dividend being cut, historically, dividend-paying companies have been found to be less erratic in choppy market conditions and continue to provide a better overall return compared to stocks that do not distribute dividends to investors.
According to GuruFocus’ Historical High Dividend Yield Screener, a Premium feature, there are a number of companies that have long and consistent histories of paying dividends. In addition, they currently have a dividend yield of over 4% and a dividend payout ratio below 0.5.
As of Oct. 26, companies that qualified for the screener and were held by at least five gurus included Intel Corp. (INTC, Financial), AT&T Inc. (T, Financial), Walgreens Boots Alliance Inc. (WBA, Financial), T. Rowe Price Group Inc. (TROW, Financial) and The Western Union Co. (WU, Financial).
Intel
Offering a 5.27% dividend yield and a payout ratio of 0.31, Intel (INTC, Financial) is held by 20 gurus. The company has not reduced its dividend in 30 years.
The Santa Clara, California-based semiconductor chip manufacturer has a $113.19 billion market cap; its shares were trading around $27.69 on Wednesday with a price-earnings ratio of 5.91, a price-book ratio of 1.11 and a price-sales ratio of 1.54.
The GF Value Line
The GF Value Line suggests the stock is significantly undervalued currently.
The GF Score of 85 out of 100 implies the company is expected to have good outperformance potential, having received high marks for everything except its momentum rank.
The GF Score indicates the company has good outperformance potential.
GuruFocus rated Intel’s financial strength 7 out of 10 as it is being supported by a comfortable level of interest coverage. The Altman Z-Score of 2.58, however, cautions it is under some pressure. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability scored a 9 out of 10 rating as a result of operating margin expansion and strong returns on equity, assets and capital that are outperforming versus competitors. It also has a moderate Piotroski F-Score of 5 out of 9, meaning conditions are typical of a stable company. Intel’s predictability rank of two out of five stars is on watch as a result of a decline in revenue per share growth over the past year. According to GuruFocus research, companies with this rank return an average of 6% annually over a 10-year period.
Of the gurus invested in Intel, PRIMECAP Management (Trades, Portfolio) has the largest stake with 1.18% of its outstanding shares. Chris Davis (Trades, Portfolio), Al Gore (Trades, Portfolio), Seth Klarman (Trades, Portfolio), Michael Price (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates and Tweedy Browne (Trades, Portfolio) also have significant holdings.
AT&T
Sporting a 7.55% dividend yield and a payout ratio of 0.50, AT&T (T, Financial) is held by 14 gurus. The company has not cut its distribution in 37 years.
The telecommunications company, which is headquartered in Dallas, has a market cap of $129.32 billion; its shares were trading around $18.16 on Wednesday with a price-earnings ratio of 6.73, a price-book ratio of 1.05 and a price-sales ratio of 0.97.
According to the GF Value Line, the stock is modestly overvalued currently.
The GF Value Line suggests the stock is modestly overvalued.
The GF Score of 68 indicates the company has poor future performance potential. While its profitability rank was high, it received middling marks for GF Value and momentum and low ratings for growth and financial strength.
The GF Score indicates the company has poor performance potential.
AT&T’s financial strength was rated 3 out of 10 by GuruFocus on the back of insufficient interest coverage and a low Altman Z-Score of 0.81 that warns it could be in danger of bankruptcy. The WACC also eclipses the ROIC, so it is struggling to create value.
The company’s profitability fared better, scoring a 7 out of 10 rating. In addition to operating margin expansion, its returns top over half of its industry peers. AT&T also has a moderate Piotroski F-Score of 6 and, despite recording a decline in revenue per share over the past several years, a one-star predictability rank. GuruFocus found companies with this rank return, on average, 1.1% annually.
With 0.05% of outstanding shares, Dalio’s Bridgewater has the largest stake in AT&T. Other top guru investors include Grantham, the T Rowe Price Equity Income Fund (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Walgreens Boots Alliance
With a dividend yield of 5.32% and a payout ratio of 0.38, 11 gurus have positions in Walgreens Boots Alliance (WBA, Financial). The company has not reduced its payment in 46 years.
The Deerfield, Illinois-based company, which operates two drugstore chains, has a $31.04 billion market cap; its shares were trading around $35.79 on Wednesday with a price-earnings ratio of 7.17, a price-book ratio of 1.24 and a price-sales ratio of 0.23.
Based on the GF Value Line, the stock is modestly undervalued currently.
The GF Value Line suggests the stock is modestly undervalued.
The company is likely to have average performance going forward as it has a GF Score of 77. It raked in high ratings for profitability and GF Value, moderate marks for growth and financial strength and a low rank for momentum.
The GF Score indicates the company has average performance potential.
GuruFocus rated Walgreens’ financial strength 5 out of 10. In addition to weak interest coverage, the low Altman Z-Score of 2.45 cautions the company is under some pressure since assets are building up at a faster rate than revenue is growing. Further, it is struggling to create value since the WACC exceeds the ROIC.
The company’s profitability fared better with an 8 out of 10 rating. Although the operating margin is in decline, its returns are outperforming versus competitors. Walgreens is also supported by a high Piotroski F-Score of 7, meaning conditions are healthy, and a one-star predictability rank.
Simons’ firm has the largest stake in Walgreens with 0.27% of its outstanding shares. John Rogers (Trades, Portfolio), Grantham, Dalio’s firm, Robert Olstein (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and several others also have positions in the stock.
T. Rowe Price Group
Generating a 4.28% dividend yield and a payout ratio of 0.44, nine gurus own T. Rowe Price Group (TROW, Financial). The company has not slashed its dividend in 35 years.
The investment management company headquartered in Baltimore has a market cap of $25.05 billion; its shares were trading around $110.66 on Wednesday with a price-earnings ratio of 10.71, a price-book ratio of 2.80 and a price-sales ratio of 3.48.
The GF Value Line suggests the stock is significantly undervalued currently.
The GF Value Line suggests the stock is significantly undervalued.
With a GF Score of 99, the company has high outperformance potential, driven by strong ratings for all five categories.
The GF Score indicates the company has high outperformance potential.
T. Rowe Price’s financial strength was rated 8 out of 10 by GuruFocus, driven by adequate interest coverage and a robust Altman Z-Score of 9.94, which indicates the company is in good standing. Assets, however, are building up at a faster rate than revenue is growing. The ROIC also outshines the WACC, so value is being created.
The company’s profitability scored a 10 out of 10 rating on the back of an expanding operating margin and strong returns that are outperforming industry peers. T. Rowe Price is also supported by a moderate Piotroski F-Score of 6 and, despite a slowdown in revenue per share growth over the past 12 months, a five-star predictability rank. GuruFocus data shows companies with this rank return an average of 12.1% annually.
Of the gurus invested in the company, Tom Gayner (Trades, Portfolio) has the largest holding with 0.14% of its outstanding shares. T. Rowe Price is also being held by Baillie Gifford (Trades, Portfolio), Ron Baron (Trades, Portfolio), Greenblatt, Jones, Gabelli, Mark Hillman (Trades, Portfolio), Dalio’s firm, Caxton Associates (Trades, Portfolio) and Fisher, among others.
Western Union
Yielding 6.3% and with a 0.42 payout ratio, Western Union (WU, Financial) is held by seven gurus. For the past 16 years, the company has not cut its dividend.
The Denver-based financial services company, which provides money transfer services both domestically and internationally, has a $5.39 billion market cap; its shares were trading around $14 on Wednesday with a price-earnings ratio of 6.27, a price-book ratio of 12.02 and a price-sales ratio of 1.15.
According to the GF Value Line, the stock, while undervalued, is a possible value trap. As a result, potential investors should do thorough research before making a decision.
The GF Value Line suggests the stock is a possible value trap.
The GF Score of 83, however, indicates it has good outperformance potential. While it received high marks for profitability and GF Value, the remaining categories got middling ratings.
The GF Score indicates the company has good outperformance potential.
GuruFocus rated Western Union’s financial strength 5 out of 10. While the company has adequate interest coverage, the Altman Z-Score of 1.36 warns it could be at risk of bankruptcy. Value is also being created since the ROIC surpasses the WACC.
The company’s profitability fared better with a 9 out of 10 rating. In addition to operating margin expansion, it has strong returns that outperform a majority of its competitors. Western Union also has a high Piotroski F-Score of 8 and, despite a slowdown in revenue per share growth, a one-star predictability rank.
With a 0.41% stake, Grantham is the company’s largest guru shareholder. Other guru investors of Western Union are Simons’ firm, Rogers, Hillman, Jones, Greenblatt, Dalio’s firm and Jeff Auxier (Trades, Portfolio).
Additional picks
Other high-yield stocks gurus like that made the screener included UGI
Disclosures
I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.
Source: https://www.forbes.com/sites/gurufocus/2022/10/28/5-historically-high-yield-stocks-popular-with-gurus/