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The Zacks Analyst Blog Highlights: Bank of Montreal, Toronto Dominion, Telefonica, Intel and Total
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Chicago, IL – May 5, 2011 – 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: Bank of Montreal (BMO - Snapshot Report), Toronto Dominion (TD - Snapshot Report), Telefonica (TEF - Analyst Report), Intel (INTC - Analyst Report) and Total (TOT - Analyst Report).
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Here are highlights from Wednesday’s Analyst Blog:
How to Get Income AND Momentum
With the 10-year T-note yielding only 3.21%, investors interested in getting income from their investments are in sort of a tough place. Dividend-paying stocks are a very good place to look for a replacement.
One thing you know for sure is that the coupon payment on a 10-year note is not going to rise. A yield of 3.21% does not offer much of a cushion against inflation. What is inflation likely to average over the next 10 years? I have no idea, but based on the spread between the regular 10-year note, and the 10-year TIPS, the market is implicitly expecting a rate of about 2.50%, which is pretty much in line with the historical experience (headline CPI) over the last 20 years of 2.57%.
While core inflation is the thing to keep an eye on when judging if monetary policy is too tight or too easy, it is headline inflation that investors -- particularly fixed-income investors -- have to be concerned about. After all, the whole point of buying a bond is to defer consumption of a basket of goods and services from today, in order to be able to consume a bigger basket of goods and services in the future.
Both of those baskets are going to contain food and energy. An expected real return of 0.75% is not a very big payoff for that long a period of delayed gratification.
Don’t be afraid to look outside the U.S. for income stocks. The dollar has been declining, and I think it will probably continue to do so. That would mean that a dividend paid in euros or yen would be translated into even more dollars. I think that the decline of the dollar is a good thing, in that it should help promote growth and reign in our massive and unsustainable trade deficit.
One group that is very heavily represented on the list below are the Canadian banks. In the financial meltdown, Canadian bank regulators proved themselves to be far more competent than their U.S. counterparts, and none of the major Canadian banks got into trouble or had to cut their dividends.
The Canadian economy, with its heavy natural resource base, is likely to outperform the U.S. economy this year. Five banks from north of the border make the list, fully 20% of all the names. Bank of Montreal (BMO - Snapshot Report) has the highest current yield of the five, but also the highest payout ratio, and a relatively low historical growth rate. At the other end of the spectrum, Toronto Dominion (TD - Snapshot Report) has the lowest current yield, but also the highest growth rate. It also has the most room to increase its dividend with a payout ratio of just 41%.
Other Places to Find Stocks
While foreign banks are heavily represented on the list, it is possible to develop a very well diversified portfolio of high yielding firms that are currently experiencing solid earnings estimate momentum. Telecommunications firms are also well represented. Telefonica (TEF - Analyst Report), for example, is based in Spain, but has extensive telecommunications holdings in Latin America.
In Technology, Intel (INTC - Analyst Report) makes the list, and is only paying out one third of its earnings, even as it yields more than 3%. It could easily sustain its historical 12.06% growth rate. If so, five years from now your yield on cost will be 5.53%.
French oil giant Total (TOT - Analyst Report) also makes the list. It, too, can probably maintain its historical growth rate of 15.05% that in five years would leave you with a yield on cost of 7.80%.
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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
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Read the full analyst report on BMO
Read the full analyst report on TD
Read the full analyst report on TEF
Read the full analyst report on INTC
Read the full analyst report on TOT
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