The S&P 500, Dow, and Nasdaq have all continued to climb to new highs in the early days of 2020. The U.S. and China are set to sign the much-anticipated phase-one trade deal Wednesday, right as the fourth quarter earnings season starts to ramp up.
Along with the U.S.-China trade progress, U.S. unemployment remains historically low, as do interest rates. Plus, JPMorgan (JPM - Free Report) , Delta (DAL - Free Report) , and other giants helped Wall Street start Q4 earnings on a high note Tuesday (also read: Why Stocks Are Poised To Soar In 2020).
Despite all the positivity, investors should think about adding a few large-cap stocks that pay a solid dividend to help anchor their portfolios in 2020…
AbbVie Inc. (ABBV - Free Report)
AbbVie is a global biopharmaceutical powerhouse that boasts the world’s top-selling drug, Humira, which treats arthritis and other conditions and accounts for roughly half of AbbVie revenues. But AbbVie’s patent protections for Humira are running out outside of the U.S., which has hurt its sales recently. AbbVie still expects U.S. sales of Humira will grow by roughly $1 billion in 2019 and biosimilars aren’t due out in the U.S. for at least a few years.
AbbVie has expanded its portfolio to help make up for Humira, and its acquisition of Botox maker Allergan (AGN - Free Report) will play a vital role in its diversification efforts. Executives said last quarter that they expect the $63 billion deal to close in early 2020. ABBV initially tumbled after the June 2019 announcement but the stock has surged over 25% in the past six months to outpace its industry’s 13% to rest near its 52-week highs. Despite the run, AbbVie still sits roughly 23% below its February 2018 highs and is a Zacks Rank #2 (Buy) at the moment that boasts an overall “A” VGM score.
Looking ahead, our estimates call for ABBV’s fiscal 2019 sales to pop 1.8%, with 2020 projected jump 8.3% higher to $36.10 billion. AbbVie’s adjusted EPS figure is projected to climb 13% in 2019 and another 5.4% in 2020. ABBV is trading at 9.4X forward 12-month earnings, which marks a discount against its industry’s 15.5X average and its own two-year median. And in keeping with the theme, the firm said last quarter that it raised its quarterly dividend by 10.3%. This will soon lift its already impressive yield of 4.84% to 5.36%, when it is payable on February 14. AbbVie’s yield already tops Pfizer (PFE - Free Report) , Bristol-Myers Squibb (BMY - Free Report) , and Johnson & Johnson (JNJ - Free Report) .
Coca-Cola (KO - Free Report)
Coca-Cola’s hasn’t needed much of an introduction in decades and it remains one of the most iconic brands in the world alongside the likes of Apple (AAPL - Free Report) and Nike NKE. Nonetheless, KO has spent the last several years expanding beyond sugary drinks amid changing consumer habits. Coca-Cola’s portfolio now includes potential Starbucks (SBUX - Free Report) rival Costa Coffee, its investment in upstart Gatorade challenger BodyArmor, and much more.
KO stock has popped 18% in the past year and it hit a new high Tuesday. This has somewhat stretched its valuation, but at 24.9X forward earnings, KO stock rests below its recent high and not too far above its three-year median of 22.7X. Coca-Cola, which is currently a Zacks Rank #3 (Hold), pays an annualized dividend that yields 2.85% at the moment. Plus, the soda powerhouse has consistently raised its quarterly payout and its yield comes in just above rival PepsiCo (PEP - Free Report) and easily tops the 10-year U.S. Treasury note’s 1.81%.
Peeking ahead, the company’s fiscal 2019 revenue is projected to surge roughly 15.5%, with 2020’s sales set to pop 4.4% higher. Investors should note that these figures include acquisitions and divestitures and KO executives expect “at least 5% growth in organic revenues” in 2019. KO’s adjusted FY19 earnings are set to climb roughly 1%, with fiscal 2020 projected jump nearly 7% higher. In the end, Coca-Cola’s transforming portfolio should help KO remain a solid large-cap, dividend-paying stock for years to come.
Broadcom Inc. (AVGO - Free Report)
Broadcom is a semiconductor firm that has expanded its reach into infrastructure software solutions through acquisitions in recent years. AVGO topped our Q4 2019 earnings and revenue estimates in the middle of December and seemed to signal that it could potentially move on from its wireless-chip business.
Broadcom CEO Hock Tan believes that its “core semiconductor business is bottoming and will return to year over year growth in the second half of our fiscal year.” Our estimates call for Broadcom’s fiscal 2020 revenue to jump 10.7% to top last year’s 8.4% top-line expansion. AVGO’s 2021 sales are then projected to climb another 6%. Meanwhile, its adjusted earnings are expected to jump 8.5% and 10.1%, respectively during this same stretch.
AVGO shares have cooled off over the last serval years compared to its own impressive history. Despite the slowdown, Broadcom stock is up 17% in the past two years and 20% in the last 12 months. AVGO stock, which is a Zacks Rank #3 (Hold) at the moment, is trading below its industry’s average of 17.4X forward earnings at 16.3X. Plus, Broadcom raised its quarterly dividend by 23% to $3.25 per share. This helped its yield climb to 4.32%, which crushes Intel’s INTC 2.11%.
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