3 large caps near 52-week lows with large dividends

energy stocks

Key points

  • With Devon Energy still very close to its 52-week low, the dividend yield is unusually high at 7.4% on an annual basis.
  • A forward dividend yield above the industry’s 5.0% and a 25-year dividend increase streak makes Eversource Energy an electric value play.
  • Unilever offers a yield of 3.8% which is twice the average for the consumer staples sector.
  • 5 stocks we like most about Devon Energy

How fitting that Thursday night’s full moon was also called the “Wolf Moon.”

U.S. stock indexes hit new all-time highs this week as the first full moon of 2024 lit up the evening sky. A better-than-expected fourth-quarter GDP report lifted investors’ spirits, bringing the S&P 500 within 100 points of the psychologically important 5,000 level. Strong earnings and guidance led to double-digit percentage gains for IBM and United Rentals on Thursday as the market continues to digest fourth-quarter reports from corporate America.

As the Wolf Moon peaked at 12:54 PM EST, the S&P 500 Index looks set to hit new highs in the coming weeks. A 3.3% GDP coupled with a mild consumer inflation reading of 2.8% has investors anticipating aggressive interest rate cuts by the Fed in 2024.

But not everyone is celebrating.

During the S&P’s 20% bull run over the past 12 months, there have been several noteworthy laggards. In fact, 5 of the S&P’s 11 global sector groups have seen declines over the past year: utilities, energy, materials, REITs and consumer staples. At the opposite end of the spectrum, the technology sector grew 46%.

The market’s strange “barbell” performance means there are many stocks that didn’t participate in the rally. More than half of the members of the S&P 500 are within 10% of their 52-week highs. But 50 are within 10% of the 52-week lows. Yes, even with the index at all-time highs, 1 in 10 S&P companies are near 52-week lows!

For value investors who like to buy low yield and accumulate high dividends, the current bifurcated environment is a heavenly paradise. These 3 underperforming large caps could be among the future stars.

Why are Devon Energy shares down?

Devon Energy Corporation shares New York Stock Exchange: DVN they are down 37% over the past 12 months and within 3% of their 52-week low. The oil and natural gas producer has been challenged by falling commodity prices and hedging mechanisms that have been unable to offset the energy slump. Oil, however, is on the rebound, with a drop in US crude inventories taking WTI crude futures near a 2-month high on Thursday. Domestic natural gas futures have also risen of late as utilities pulled more gas from storage than expected last week.

With DVN closing higher for four consecutive days, there is growing hope that $40.51 was the bottom. However, with the stock still very close to its 52-week low, the dividend yield is unusually high. On a 1-year forward basis, DVN has a yield of 7.4%. The company pays a “fixed plus variable” dividend, meaning it is subject to cash flow generation and therefore fluctuations in commodity prices. But considering that dividends have been paid for 31 consecutive years, the current decline could represent an opportunity.

What is Eversource Energy’s 52-week low?

Eversource Energy NYSE:ES it set a 52-week low of $52.03 on November 1, 2023. It reached $64.64 this month but is back within 4% of its 52-week low. Electricity and gas companies tend to sell off during periods of rising interest rates because this hinders its ability to obtain affordable financing for growth projects. Eversources’ third-quarter earnings report was also disappointing, but it came with a footnote that a proposed NSTAR fee would shift a big chunk of revenue into future quarters.

Prospects for better future quarterly performance and a cheap valuation make Eversource worth a look here. The S&P 500 stock trades at 16 times trailing earnings, well below its five-year average of 23 times and the electric utility sector average of 23 times. An industry forward dividend yield above 5.0% and a 25-year streak of dividend increases also make ES an electric value play.

What is Unilever’s dividend yield?

British consumer goods leader Unilever PLC NYSE:UL it is trading less than a dollar away from its 52-week low of $46.16 and 27% away from its all-time high. The company behind Dove, Ax and other household brands has been slowed by weaker profit margins and a general market shift away from defensive consumer staples names. For long-term investors who value a reliable dividend, this could be a favorable entry point.

With an annualized dividend of $1.82, Unilever offers a yield of 3.8% which is twice the industry average. The company will report fourth-quarter and full-year financial results on Feb. 8, which could be a short-term catalyst for the stock. At last month’s Fireside Chat with Barclays, CEO Hein Schumacher discussed “major changes” intended to drive higher revenue growth and better performance across the top 30 brands.

Before you consider Devon Energy, you’ll want to hear this.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Devon Energy wasn’t on the list.

While Devon Energy currently has a “Moderate Buy” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here

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