With the second quarter officially underway and the S&P 500 trading right back to the top of a trading range that has been in place since the fall, the question is what investors should do now. Many have moved cash to insured money markets for safety and to capture the highest yields in years. For those who think the current rally can continue through the upcoming first-quarter earnings reports, it makes sense to see what top analysts on Wall Street prefer now.
A new Goldman Sachs report focuses on stocks with solid free-cash-flow generation and cash return on capital invested, which is a cash-flow-based analysis that, by making a series of economic adjustments to traditional accounting data, aims to make nonfinancial companies comparable, regardless of industry or domicile.
In addition, the analysts screened for companies with margin expansion and sales and earnings growth potential, for stocks that are out of consensus favor, and for value and dividend growth potential. We screened the stocks in these various categories, all of which are Buy rated at Goldman Sachs, looking for those that paid the highest dividends. The following seven for investors to consider hit our screens.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer, which some feel is worth more than $10 billion and may be a segment of the company that could be sold. Altria posted strong fourth-quarter results and also announced a shareholder-friendly $1 billion stock buyback plan.
Investors receive an 8.43% dividend. Goldman Sachs has a $52 target price on Altria stock. The consensus target is $49.63, and shares closed on Friday at $44.62.
Amgen
This biotech giant remains a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.
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