The Zacks Analyst Blog Highlights: Exxon Mobil, Chevron, General Electric,
Johnson & Johnson and Wells Fargo
CHICAGO, Nov. 27, 2012
CHICAGO, Nov. 27, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Exxon Mobil Corporation
(NYSE:XOM), Chevron Corporation (NYSE:CVX), General Electric Company
(NYSE:GE), Johnson & Johnson (NYSE:JNJ) and Wells Fargo & Company (NYSE:WFC).
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Here are highlights from Monday's Analyst Blog:
Dividend Stocks Losing Luster?
The average dividend yield on S&P 500 stocks has approximately halved to 2%
over time. While significant inflows to these stocks have caused their yields
to drop, the total returns from dividend stocks still compare favorably with
yields on Treasuries. In other words, when total returns are calculated, which
includes growth in profit, the comparison is favorable. The trick is to select
higher-than-average dividend yielding stocks and discard those with mediocre
In order to identify popular dividend paying stocks, we went through the top
10 holdings of three fund managers as of the most recently available date.
Specifically, we checked the top 10 stocks of three dividend-oriented large
cap funds, namely Fidelity Equity Dividend Income Fund (FEQTX), T. Rowe Price
Equity Income Fund (PRFDX) and Vanguard High Dividend Yield Index Fund
Investor Shares (VHDYX).
The results surprised us a bit as they included several names outside the
usual realm of utilities and pharmaceuticals. Exxon Mobil Corporation
(NYSE:XOM), Chevron Corporation (NYSE:CVX), General Electric Company (NYSE:GE)
and Johnson & Johnson (NYSE:JNJ) found a place in the top 10 holdings of all
three mutual funds. In addition, Wells Fargo & Company (NYSE:WFC) was included
in the top 10 of Fidelity and T. Rowe Price.
Exxon Mobil Corporation
is well known as the world's largest publicly traded oil company.
Approximately 83% of Exxon's earnings come from its operations outside the
U.S. Exxon Mobil has long been a core holding for investors seeking a
defensive name with continued dividend growth. We maintain our Neutral
recommendation on Exxon Mobil following its third quarter 2012 report. The
stock provided a dividend yield of 2.65%. It had a forward P/E multiple of
10.9 versus 7.7 average for the industry.
Chevron Corporation is one of the largest oil and gas companies in the world,
based on proven reserves. Chevron's current oil and gas development project
pipeline is among the best in the industry. We see the stock performing in
line with the broader market and maintain our Neutral recommendation. Prior to
the announcement of its third quarter results, the stock gave a dividend yield
of 3.13%. It had a forward P/E of 8.9 compared with 8.5 for the industry.
General Electric Company
is one of the largest and the most diversified technology and financial
service corporations in the world. More than 50% of GE's revenue is generated
from emerging markets. The company generates huge free cash flow. We maintain
our Neutral recommendation on General Electric. Prior to the announcement of
its third quarter results, the stock provided a dividend yield of 3.01%. The
stock had a forward P/E of 14.5 versus 16.1 for the industry.
Johnson & Johnson's worldwide business is segregated into three segments:
Consumer, Pharmaceutical, and Medical Devices & Diagnostics. For the full year
2011, these segments contributed 23%, 37% and 40% respectively to the
company's revenue. Johnson & Johnson recently struck several deals which
should boost the company's top line. There are many candidates in final stages
of development which hold strong potential. Emerging markets recorded 13%
growth in 2011. Based on third quarter results, we maintain our Neutral rating
on the stock. The stock recently had a dividend yield of 3.44%. Johnson &
Johnson had a forward P/E of 13.9 compared with 14.2 for the industry.
Wells Fargo & Company
is one of the largest financial services companies in the U.S. (in terms of
assets) with $1.3 trillion in assets and over $928 billion in deposits. The
company provides banking, insurance, trust and investments, mortgage banking,
investment banking, retail banking, brokerage services and consumer and
commercial finance. Higher non-interest income along with cost control
measures acted as positives for the latest quarter. After reviewing the third
quarter results, we maintain our Neutral recommendation on the shares. The
stock provided a dividend yield of 2.57%. The stock had a forward P/E of 10.3
versus 12.1 for the industry.
Barring Exxon Mobil and Chevron Corporation which are more expensive on a
forward P/E basis, the other three widely held dividend stocks are cheaper
than the industry average. This suggests that the timing may still be
favorable for taking long positions on select large cap dividend paying
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