For Immediate Release
Chicago, IL – December 21, 2021 – 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: The Travelers Companies, Inc. TRV, Cincinnati Financial Corporation CINF, Duke Energy Corporation DUK, C.H. Robinson Worldwide, Inc. CHRW and Bunge Limited BG.
Here are highlights from Monday’s Analyst Blog:
5 Low-Beta, High-Yielding Stocks to Buy in a Capricious Market
Wall Street has been suffering since Black Friday as the resurgence of coronavirus with its new variant – Omicron – has shaken market participants’ confidence across the globe. Moreover, a higher interest rate in 2022 as indicated by several major central banks, has also resulted in severe market volatility.
Despite the fact that December has generally remained favorable on Wall Street, investors are uncertain about the direction of stock market movement in the final eight trading days of this year. At this stage, it will be prudent to invest in low-beta high dividend-paying stocks with a favorable Zacks Rank. Here are five of them — The Travelers Companies, Cincinnati Financial, Duke Energy, C.H. Robinson Worldwide and Bunge.
Omicron Spreads Globally
With the coronavirus pandemic showing no signs of letting up, Wall Street continues to grapple with severe volatility, which has been plaguing it over the last three weeks. The resurgence of coronavirus either in the form of Delta or Omicron, has been creating intermittent hurdles which otherwise could have been a smooth recovery of the global economy.
The available data of Omicron has so far indicated that this variant may be less severe than Delta but highly transmissible. Most of Europe is already affected by Omicron and big nations have opted for partial or full lockdown during the holiday season. Asia is also reporting increasing Omicron cases. In the United States, 25 states have already reported Omicron cases.
On Dec 18, the World Health Organization (WHO) reported that 89 countries have witnessed the Omicron variant of coronavirus and the number of cases is doubling in 1.5 to 3 days in areas with community transmission. Globally, various sports and entertainment programs have been postponed or cancelled due to the spread of Omicron.
Higher Interest Rate Looms Large
Market participants are wondering whether 2022 will be marked as the year of higher interest rate globally. In the United States, on Dec 15, Fed Chairman Jerome Powell said in his post FOMC statement that the central bank will raise the tapering of the monthly bond-buy program from $15 billion per month to $30 billion per month effective January 2022. At this rate, the quantitative easing program will end in March 2022.
Although, Powell refrained of commenting anything on when the Fed will raise the benchmark lending rate and at what magnitude, Fed’s dot-plot indicated that all 18 members are expecting at least one rate hike in 2022. Out of 18 Fed members, 12 are expecting three rate hikes in 2022 followed by a two more rate hikes in 2023 and 2024.
On Dec 17, the Bank of England raised the benchmark interest rate to 0.25% from 0.1%. This marked the first rate hike by the British central bank in three years. On Nov 10, the European Central Bank (ECB) Governing Council member Robert Holzmann said that the ECB could stop bond-buying program by September 2022.
The primary concerns of these central bankers are soaring inflation. The pandemic-led global disruption of the supply-chain system inflated input costs while growing demand is pulling up the general price level.
Why Low-Beta Stocks?
Wall Street is suffering from day-to-day fluctuations. In the week ended Dec 10, the Dow, the S&P 500 and the Nasdaq Composite – rallied 4%, 3.8% and 3.5%, respectively. However, for the week ended Dec 17, these three indexes tumbled 1.7%, 1.9% and 3%, respectively.
Nevertheless, the fundamentals of the U.S. economy remained solid. In its latest projection on Dec 16, the Atlanta Fed reported that the U.S. economy would grow by 7.2% in fourth-quarter 2021. U.S. GDP grew 6.4%, 6.7% and 2.1%, in the first, second and third quarters of this year, respectively. Moreover, in fourth-quarter 2021, total earnings of the S&P 500 Index are expected to up 19.3% year over year on 11.4% higher revenues.
At this stage, investment in low-beta stocks with a high dividend yield and a favorable Zacks Rank may be the best option. If market’s northbound journey continues, then the favorable Zacks Rank of these stocks will capture the upside potential. However, if markets take a downturn, then low-beta stocks will minimize portfolio losses and dividend payment will act as a regular income stream.
Our Top Picks
We have narrowed our search to five large-cap (market capital > $10 billion) low-beta stocks whose dividend yield is higher than the current yield on the benchmark 10-Year U.S. Treasury Note. These companies have strong growth potential for the rest of 2021 and have seen positive earnings estimate revisions in the last 60 days. 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.
Bunge Limited operates as an agribusiness and food company worldwide. BG has an integrated global agribusiness spanning the farm-to-consumer food chain. Bunge operates in five segments: Agribusiness, Edible Oil Products, Milling Products, Sugar and Bioenergy, and Fertilizer. Bunge processes, produces, moves, distributes and markets food in five continents.
Zacks Rank #1 Bunge has an expected earnings growth rate of 44.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 36.1% over the last 60 days. BG has a beta of 0.64 and a current dividend yield of 2.38%.
C.H. Robinson Worldwide is benefiting from favorable freight market conditions, such as increased volumes and higher pricing, amid tight capacity. In the first nine months of 2021, C.H. Robinson returned around $663 million to its shareholders through dividends ($209 million) and share buybacks ($454 million).
Zacks Rank #1 CHRW has an expected earnings growth rate of 69.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 30 days. C.H. Robinson has a beta of 0.72 and a current dividend yield of 2.17%.
The Travelers Companies boasts a strong market presence in auto, homeowners’ insurance, commercial U.S. property-casualty insurance with solid inorganic growth. A high retention rate, increase in new business and positive renewal premium change bode well. TRV’s commercial businesses should perform well owing to market stability.
The Travelers Companies remains optimistic about the personal line of business, given growth at the profitable agency auto and homeowners business. TRV expects net investment income from non-fixed income portfolio to be $420 million to $430 million quarterly in 2022. Sufficient capital boosts shareholder value.
Zacks Rank #2 The Travelers Companies has an expected earnings growth rate of 19.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 30 days. The Travelers Companies has a beta of 0.76 and a current dividend yield of 2.23%.
Cincinnati Financial Corporation continues to grow premiums through a disciplined expansion of Cincinnati Re while the division makes a nice contribution to its overall earnings. Price increases and a higher level of insured exposures are the other positives.
Cincinnati Financial is focused on earning new business by appointing new agencies and believes that an agent-focused business model will drive long-term premium growth. Cincinnati Financial boasts solid capital position based on which it has returned value to its shareholders. A favorable reserve release should drive growth for CNF. Consistent cash flow and sufficient cash balances will continue to boost liquidity.
Zacks Rank #2 Cincinnati Financial has an expected earnings growth rate of 69.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 30 days. CINF has a beta of 0.68 a current dividend yield of 2.23%.
Duke Energy Corporation operates as an energy company in the United States. DUK operates through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.
Duke Energy is a premier utility service provider that invests heavily in infrastructure and expansion projects. During the 2021-2025 period, it projects to spend $59 billion. DUK has lowered its carbon emissions by 40% since 2005 and aims to electrify all its light-duty vehicles by 2030.
Duke Energy has an expected earnings growth rate of 2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. DUK has a beta of 0.32 a current dividend yield of 3.82%.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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