Morgan Stanley ran a quantitative screen based on analyst research to identify best risk and reward among dividend-paying stocks.
“This methodology compares upside/downside to price target, projected dividend yields, and bull-bear spread, and 1-year volatility to optimize risk and return metrics,” Nicholas Lentini and team wrote in a note. “We then ran the final ‘To Own’ and ‘To Avoid’ stocks by our coverage analysts as a fundamental overlay.”
The lists “represent the top and bottom two deciles of total return (PT upside + dividend yield) stocks as ranked by our model,” he said.
The systematic top dividend stocks to own are:
- Eastman Chemical (EMN), dividend yield 3%, total expected return 77%
- LyondellBasell (LYB), 9%, 41%
- Linde (LIN), 2%, 29%
- Air Products and Chemicals (APD), 3%, 30%
- Public Service Enterprise (PEG), 3%, 25%
- FirstEnergy (FE), 4%, 36%
- Vistra (VST), 3%, 35%
- AES (AES), 3%, 27%
- Crown Holdings (CCK), 1%, 42%
- Visa (V), 1%, 44%
- MasterCard (MA), 1%, 38%
- AT&T (T), 6%, 29%
- AbbVie (ABBV), 4%, 42%
- Royalty Pharma (RPRX), 2%, 20%
- Yum! Brands (YUM), 2%, 29%
- Wells Fargo (WFC), 3%, 44%
- Citizens Financial Group (CFG), 5%, 41%
- Regions Financial (RF), 4%, 31%
- Ross Stores (ROST), 1%, 37%
- TJX (TJX), 2%, 24%
- Ferrari (RACE), 1%, 51%
- Energy Transfer (ET), 11%, 34%
- Western Midstream (WES), 8%, 31%
- Plains All American (PAA), 8%, 30%
- Philip Morris (PM), 5%, 21%
- Invitation Homes (INVH), 2%, 23%
- Raytheon (RTX), 2%, 35%
- Diamondback Energy (FANG), 9%, 36%
- Microchip Technology (MCHP), 3%, 27%
- Primoris Services (PRIM), 1%, 55%
- Nike (NKE), 1%, 39%
- Comcast (CMCSA), 3%, 39%
- Microsoft (MSFT), 1%, 33%
- CDW (CDW), 1%, 28%
- Zoetis (ZTS), 1%, 66%
The stocks to avoid are:
- Consolidated Edison (ED), 3%, -11%
- Southern (SO), 4%, -8%
- Caterpillar (CAT), 3%, -23%
- Lumen Technologies (LUMN), 2%, -9%
- Lazard (LAZ), 5%, -13%
- American Eagle (AEO), 4%, -28%
- Kohl’s (KSS), 5%, -30%
- Urban Edge (UE), 4%, -9%
- Lithia Motors (LAD), 1%, -20%
- Penske Automotive (PAG), 2%, -22%
- Group 1 Automotive (GPI), 1%, -23%
- Sonic Automotive (SAH), 2%, -40%
- FactSet (FDS), 1%, -23%
- Brown-Forman (BF.B), 1%, -12%
- Watsco (WSO), 3%, -26%
- eBay (EBAY), 2%, -15%
- UPS (UPS), 3%, -23%
Photo by Glenn Carstens-Peters on Unsplash