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Top 5 Picks With Dividend Yield Higher Than 10-Year Note Yield

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Wall Street closed at a record high on Jul 12, just a day before the major banks kick start the second-quarter 2021 earnings session. The market's benchmark — the S&P 500 Index — recorded a closing high of 4,384.63 and an all-time high of 4,386.68 in intraday trading.

The tech-heavy Nasdaq Composite posted a closing high of 14,733.24 and an all-time high of 14,761.08 in intraday trading. The blue-chip Dow registered a closing high of 34,996.18. In intraday trading, the 30-stock index touched a technical barrier of 35,000, for the first time since May 10.

While market participants are busy analyzing second-quarter earnings results, stocks with a favorable Zacks Rank and current dividend yield more than double the current yield of the benchmark 10-Year U.S. Treasury Note look attractive.

Notwithstanding the fact that the northbound journey of Wall Street may continue, markets could face a short spell of downtrend as the U.S. economy is yet to recover fully from the pandemic-led distortions. Moreover, higher inflation and the resurgence of the highly infectious delta variant of the coronavirus in Asia and some parts of Europe may cause volatility.

In this situation, investment in these stocks may be prudent. A favorable Zacks Rank will allow these stocks to capture the market's upside while a robust dividend yield will act as a solid income stream during its downturn.

Stable Fundamentals of the U.S. Economy

The U.S. economy is witnessing a robust recovery in 2021 from last year's coronavirus-led devastations. U.S. manufacturing is flourishing and the services sector is expanding gradually on the back of reopening. The struggling labor market is showing signs of a gradual recovery.

Consumer spending, the major driver of the U.S. economy, is expected to remain firm buoyed by around $2.6 trillion of savings. Per the consumer confidence data in June, the number of Americans planning to purchase homes, automobiles, and major appliances in the next six months saw a solid rise. This will likely support consumer spending in the second half of 2021.

The Fed has reiterated that it will continue to pursue an easy-monetary policy until the labor market recovers fully. Fed Chairman Jerome Powell reaffirmed that the recent augmentation in the general price level is transitory.

The first half of 2021 was extremely favorable for mergers and acquisitions (M&A) and initial public offerings ("IPO"). A massive surge in IPO indicates enough investor appetite for new stocks and growing confidence for risky assets like equities. Likewise, the impressive performance of Wall Street and the stable fundamentals of the U.S. economy are the major drivers of strong M&A deals.

Our Top Picks

We have narrowed down our search to five large-cap (market capital > $10 billion) stocks with current dividend yield of more than 3%. The yield of the 10-Year U.S. Treasury Note is currently well below 1.5%. These stocks have strong growth potential for the rest of 2021 despite the fact that  each of them has advanced more than 25% year to date.

Moreover, all of these stocks have seen solid earnings estimate revisions within the last 60 days. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Zacks Investment Research
Image Source: Zacks Investment Research

MetLife Inc. (MET - Free Report) is a financial services company that provides insurance, annuities, employee benefits, and asset management services worldwide. It operates through five segments: U.S., Asia, Latin America, Europe, the Middle East and Africa, and MetLife Holdings.

The company has an expected earnings growth rate of 15.8% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 3.2% over the last 60 days. This Zacks Rank #2 stock has a current dividend yield of 3.3%. The stock price has rallied 26.8% year to date.

Regency Centers Corp. (REG - Free Report) is one of the leading publicly traded retail real estate investment trusts in the United States. Its portfolio mainly constitutes of grocery-anchored community and neighborhood centers.

The company has an expected earnings growth rate of 15.6% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 1.8% over the last 30 days. This Zacks Rank #2 stock has a current dividend yield of 3.7%. The stock price has climbed 45.2% year to date.

International Paper Co. (IP - Free Report) is a global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Europe, Latin America, Russia, Asia, and North Africa. It operates through three segments: Industrial Packaging, Global Cellulose Fibers, and Printing Papers.

The company has an expected earnings growth rate of 74.6% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 0.8% over the last 7 days. This Zacks Rank #1 stock has a current dividend yield of 3.3%. The stock price has surged 25.1% year to date.

The Blackstone Group  Inc. (BX - Free Report) is an alternative asset management firm specializing in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies.

The company has an expected earnings growth rate of 34% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 1.1% over the last 60 days. This Zacks Rank #2 stock has a current dividend yield of 3.3%. The stock price has jumped 57.2% year to date.

Energy Transfer LP (ET - Free Report) owns and operates diversified portfolios of energy assets and provides energy-related services primarily in the United States.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 67.7% over the last 60 days. This Zacks Rank #2 stock has a current dividend yield of 5.8%. The stock price has soared 69.2% year to date.

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