3 High Dividend Stocks That Wall Street Predicts Could Also Rally 15% or More

NYSE: CVX | Chevron Corporation  News, Ratings, and Charts

CVX – Because the resurgence of COVID-19 cases and rising inflation could precipitate a market correction in the near term, high dividend-paying stocks could be ideal bets to hedge against the potential investment portfolio losses. Analysts expect dividend-paying stocks Chevron (CVX), British American Tobacco (BTI), and Sumitomo Mitsui (SMFG) to rally by more than 15% in the near term. So, we think these stocks could be solid bets now. Let’s discuss.

Concerns about the resurgence of COVID-19 cases and rising inflation are fueling significant volatility in the markets currently. In fact, many analysts and investors expect a broader market correction in the near term.

Given this backdrop, one of the ways to protect an investment portfolio against a potential loss could be adding fundamentally sound stocks that pay high dividends. Because the Fed is still committed to maintaining ultra-low benchmark interest rates, many stocks’ dividend yields look attractive compared to the yields of safer instruments.

Wall Street analysts expect high dividend-paying stocks Chevron Corporation (CVX), British American Tobacco (BTI), and Sumitomo Mitsui Financial Group, Inc. (SMFG) to rally by more than 15% in price in the coming months. So, we think it could be wise to bet on these stocks.

Chevron Corporation (CVX)

CVX does business in integrated energy, chemicals, and petroleum operations worldwide. Operating in Upstream and Downstream business segments, the San Ramon, Calif.-based company produces and transports crude oil and natural gas.

CVX is scheduled to pay a $1.34 quarterly dividend on September 10, 2021. The stock pays a $5.36 dividend per share annually, which translates to a 5.22% yield. The company’s dividend has grown at a 4% rate over the past five years.

CVX’s Chevron Australia Pty Ltd. subsidiary announced on July 1 that it would proceed with the $4 billion Jansz-Io Compression (J-IC) project. The project is the modification of the existing Gorgon development that involves constructing and installing a floating Field Control Station (FCS) that will provide gas supply from the Jansz-Io field to the three existing LNG trains and domestic gas plant on Barrow Island. The project will be an important source of clean-burning natural gas to customers, enabling energy transitions in countries across the Asia-Pacific region.

CVX’s total revenues for its fiscal second quarter, ended June 30, 2021, increased 178.6% year-over-year to $37.60 billion. The company’s pre-tax income came in at $4.42 billion for the quarter, versus  a $10.60 billion  loss in the year-ago period. CVX’s adjusted earnings came in at $3.27 billion, compared to a $2.92 billion loss in the prior-year period. Its adjusted EPS was $1.71, versus a $1.56  loss per share  in the year-ago period. The company had $7.53 billion in cash and cash equivalents as of June 30, 2021.

Analysts expect the stock’s EPS to increase 1737.3% for the current quarter, ending September 30, 2021, to $2.02. The $40.51 billion consensus revenue estimate for the current quarter represents a 65.7% gain from the prior-year period. CVX has gained 24.7% over the past nine months and 11.8% over the past six months. It closed yesterday’s trading session at $102.64.

Of the 13 Wall Street analysts that have provided ratings for the stock, 10 rated it Buy, and three rated it a Hold. The $127.75 average price target represents a potential 42.6% upside.

British American Tobacco p.l.c. (BTI)

BTI is a London-based multi-category consumer goods company that delivers tobacco and nicotine products internationally. The company manufactures and sells cigarettes, roll-your-own tobacco, cigars, e-cigarettes, medicinal nicotine products, and tobacco heating products. It sells its products to retail outlets.

BTI is scheduled to pay a $0.75 quarterly dividend on August 24, 2021. The stock distributes a $2.91 per share dividend annually, which translates to a 7.83% yield. The company’s dividend has grown at a 5.2% rate over the past five years.

In an announcement dated May 28, 2021, BTI claimed that its vape brand Vuse was the first global carbon-neutral vape brand. In 2020 alone, BTI achieved a 30.9% reduction in emissions from its operations. This is a significant contribution to its ambitious climate targets, which include carbon neutrality across its own operations by 2030.

BTI’s revenue came in at £12.18 billion ($16.81 billion) in the half-year ended June 30, 2021. The company reported £5.24 billion ($7.23 billion) in adjusted profit from operations. Its total comprehensive income was £2.76 billion ($3.80 billion) for the period. BTI’s adjusted EPS amounted to 154.20 pence over this period. As of June 30, 2021, BTI had $3.01 billion in cash and cash equivalents.

BTI has rallied 7.4% over the past year and ended yesterday’s trading session at $37.20. Wall Street analysts expect the stock to hit $50 in the near term, which indicates a potential 34.4% upside. Both  Wall Street analysts that have rated the stock have rated it ‘Buy.’

Sumitomo Mitsui Financial Group, Inc. (SMFG)

Headquartered in Tokyo, SMFG provides commercial banking, leasing, securities, consumer finance, and other services internationally.

SMFG paid a $0.17 semi-annual dividend on March 29, 2021. The stock distributes $0.34 per share annually, which translates to a 4.82% yield. The company’s dividend has grown at a 5.7% rate over the past five years.

On July 29, 2021, SMFG’s Sumitomo Mitsui Banking Corporation (SMBC) announced the successful execution of the first trade accounts receivable discounting transaction on its digital trade platform named Marco Polo, with a Japanese corporate client. The pandemic-led digital transformation has incentivized many customers to review their business processes that involve exchanging documents between multiple overseas parties. Using blockchain technology, SMBC is looking forward to helping digitize these trade operations, supporting the development of Marco Polo and capitalizing on the growing demand.

SMFG’s operating profit for its fiscal first quarter, ended June 30, 2021, came in at ¥287.24 billion ($2.60 billion), representing a 143.2% year-over-year improvement. The company’s net profit has been reported at ¥204.84 billion ($1.86 billion), up 138% from the prior-year period. Its EPS has increased 135.9% year-over-year to ¥148.24 ($1.35). The company had  ¥71.55 trillion ($650 million) in cash and cash equivalents.

Analysts expect SMFG’s revenue to improve 1.3% year-over-year to $13.10 billion for the current year. SMFG has rallied 19.6% over the past nine months and 2.8% over the past month. The $8.22 average price target represents a 15.9% potential upside from its $7.09 last closing price.

CVX shares were trading at $102.37 per share on Friday afternoon, down $0.27 (-0.26%). Year-to-date, CVX has gained 24.44%, versus a 19.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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