The big news Tuesday was that the S&P 500 closed at its first new record since the pandemic selloff began in February. The proxy index for the broader market has climbed over 5% in 2020 and 50% since March 23, with the recent positivity driven by better-than-projected earnings results and further signs of economic recovery.
The S&P 500 and the Nasdaq both closed at new highs Tuesday, before pulling back Wednesday on customary low trading volume in August. Big tech names such as Apple AAPL and Amazon AMZN continue to push higher, while traditional retailers Walmart WMT and Target TGT showcased their ability to boom during rough times, spurred by their e-commerce expansion.
The third quarter earnings outlook has improved and businesses—outside of those directly impacted by the coronavirus social distancing push such as transportation and travel & leisure—are showing signs of resilience and recovery.
Behind much of the broader strength in the equities market, rests the historic monetary and fiscal support. There are, however, worries such as a second wave of the coronavirus in the fall, growing turmoil between the two largest economies in the world, and the uncertainty of the upcoming U.S. election.
All that said, investors likely still want to hunt for stocks and remain in the market. And it might be best to find stable stocks that offer solid dividend yields. So let’s examine three highly-ranked stocks from three different industries that fit the bill…
B&G Foods, Inc. BGS
B&G Foods is a wholesale foods company with a portfolio of over 50 brands that includes everything from Green Giant to Ortega. The firm’s shelf-stable and frozen foods have proven to be a hit as millions of people stock up and eat from home more than ever. B&G beat our Q2 earnings and revenue estimates at the end of July, with sales up 38%, while its adjusted earnings soared 87%.
The second quarter is projected to be the blowout period for the BGS, as it accounts for what is likely to be the largest period of the stay-at-home movement. Still, our Zacks estimates call for its adjusted Q3 earnings to climb 19% on 12% stronger revenue, which would top the first quarter’s 9% jump. B&G’s adjusted fiscal 2020 EPS figure is then projected to climb over 35% on over 16% higher sales.
BGS is a Zacks Rank #2 (Buy) at the moment that sports an “A” grade for Growth and a “B” for Value in our Style Scores system. The stock is up 70% in 2020 to crush its industry’s 3% decline, yet it still trades at a solid discount to the Food Market.
Despite sitting right near its 52-week highs at $30 per share, BGS rests 40% below its 2016 records. Plus, BGS’s dividend yield comes in at a whopping 6.38% right now, which blows away its industry’s 0.33% average and the S&P 500’s 1.70%. The company’s next quarterly dividend is payable on October 30 to shareholders of record as of September 30.
Qualcomm QCOM
Qualcomm topped our Q3 fiscal 2020 earnings estimates last month. Wall Street was also ecstatic that the smartphone chip making giant finally resolved its licensing battle with Huawei, despite growing tension between the U.S. and China. QCOM said it would receive a $1.8 billion payment from the Chinese telecom firm for outstanding fees. QCOM also landed a new long-term agreement to license its patented technologies for Huawei use.
The move comes after Qualcomm and Apple resolved their legal battle in 2019. Investors should also note that an appeals court just recently overturned the FTC’s 2019 antitrust victory against QCOM. Shares of Qualcomm are now up 20% in the last month, 25% in 2020, and 45% in past year to double up the telecom industry. Despite outclimbing its peers and trading near new highs, QCOM still trades at a discount against its own 12-month highs and its industry.
Peeking ahead, our Zacks estimates call for QCOM’s adjusted Q4 earnings to jump 50%, on 23% higher revenue. And Qualcomm’s outlook appears even stronger for its fiscal 2021. Qualcomm’s positive earnings revisions activity helps it earn a Zacks Rank #2 (Buy) right now.
The firm has established itself as one of the early 5G standouts, as its modem processors are being used by the likes of Samsung and Apple. And in fitting with today’s theme, Qualcomm’s 2.34% dividend yield tops the S&P 500’s 1.69% average, as well as Microsoft’s MSFT 0.97%.
AbbVie ABBV
AbbVie sells one of the world’s best-selling drugs, Humira. That said, its patent protections are ending outside of the U.S., with biosimilars expected to hit the U.S. in a few years. Of course, the pharmaceutical giant has seen this coming and prepared for the future and it officially completed in early May its $63 billion acquisition of Allergan plc. Wall Street has seemed pleased with the Allergan deal that adds Botox and other popular beauty-focused drugs to its expanding roster.
AbbVie’s therapeutics span a wide variety of illnesses and its R&D pipeline is strong. ABBV is up 50% from the market’s lows to easily outpace the Large Cap Pharma industry’s 30%. And its shares are have popped 45% in the past 12 months, against its industry’s 15%. And AbbVie stock sits around15% off its early 2018 highs, which could give it more room to run.
Zacks estimates call for AbbVie’s revenue to surge 37% in FY20 and another 18% in FY21, driven in part by its Allergan deal. Plus, ABBV’s adjusted fiscal year earnings are projected to jump 17% both this year and next. AbbVie is a Zacks Rank #3 (Hold) at the moment, with a 4.91% dividend yield that easily tops its industry’s 2.57% average.
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