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3 Large-Cap Stocks for Dividend Investors to Buy with S&P 500 Up 19%

Benjamin Rains

All three major U.S. indexes popped on Monday to help end September on a high note. Both the Dow and the S&P 500 rest within striking distance of their all-time highs despite a volatile August and growing global economic uncertainty brought on, in part, by the on-going U.S.-China trade war.

Wall Street and investors seem happy enough with the U.S. Federal Reserve’s decision to cut its benchmark interest rate for the second time since July by 25 basis points. The Fed cut rates to help provide a boost for a slowing U.S. economy. The yield on the 10-year U.S. Treasury note rested at roughly 1.66% as of late afternoon Monday, which sits far below early October 2018’s approximately 3.1% and July 2019’s 2.1%.

These rates are low by historical standards as well, but stand out against Germany and Japan’s negative rates. Therefore, the interest rate environment could see Wall Street maintain its current there is no alternative to stocks course. Overall, the S&P 500 has climbed approximately 19% in 2019, to mark its strongest performance in the first three quarters since 1997.

Some of 2019’s surge can be attributed to Q4 2018’s selloff, driven by tech powers such as Apple AAPL and Facebook FB. With all of this in mind, investors should think about buying dividend-paying stocks from companies with stable and growing businesses. Today, we found three such stocks utilizing our Zacks Stock Screener…

Walmart WMT

Walmart and rivals such as Target TGT and Costco COST have proven they thrive in the Amazon AMZN age. WMT has rolled multiple delivery and curbside-pick up offerings as it beefs up its e-commerce business, which includes its majority ownership of Flipkart, one of India’s largest e-commerce sites. Last quarter, the Bentonville, Arkansas-headquartered firm’s U.S. comp sales surged 7.3% on a two-year stack to mark its strongest growth in more than a decade. Meanwhile, U.S. e-commerce sales surged 37% on the back of strong online grocery sales and Walmart’s “NextDay” delivery service is expected to cover about 75% of the U.S. population this calendar year.

Shares of Walmart have surged 28% in 2019 to crush the S&P and help push WMT stock up 52% over the past 24 months. Looking ahead, our Zacks Consensus Estimates call for Walmart’s current-year (fiscal 2020) revenue to jump 2.4%, with 2021 projected to come in 2.9% higher. The retail powerhouse has also seen its earnings estimate revisions trend almost completely upward since it reported its Q2 results, with substantial moves for fiscal 2020 and 2021. This positivity helps WMT earn a Zacks Rank #2 (Buy) at the moment.

The company also boasts a “B” grade for Value and an “A” for Growth in our Style Scores system. Plus, Walmart currently pays an annualized dividend of $0.53 a share, for a 1.79% yield, which comes in above the 10-year U.S. treasury’s 1.66%.

McDonald's MCD

McDonald's, like Walmart and industry peers such as Starbucks SBUX, has pushed headfirst into the delivery space. The historic fast-food chain announced in mid-July that is added DoorDash as a delivery partner, which effectively ended its previously exclusive relationship with UberEats UBER.

MCD is coming off two solid quarterly performances and last quarter saw its same-store sales surge 6.5%, with U.S. comps up 5.7%, driven by higher prices, increased delivery, and self-ordering kiosks. Investors should note that MCD has shifted toward a more franchise-based model over the last five years or so in order to increase profitability amid a changing consumer landscape. In fact, approximately 93% of its over 38,000 locations were franchises at the end of Q2, up from roughly 80% in the second quarter of 2015.  

MCD stock is up 29% in the last year and 21% in 2019, which does fall behind its peer group’s 29% climb—driven by Chipotle’s CMG 95% jump. The company’s adjusted fiscal 2019 earnings are projected to jump 1.4% on 0.50% higher revenue. Then, 2020’s EPS figure is expected to surge 9.5% higher on roughly 3% stronger sales. McDonald's is a Zacks Rank #3 (Hold) at the moment that holds a “B” grade for Growth. Meanwhile, the company on September 19 announced that it raised its quarterly dividend by 8% for a new annualized payout of $5.00 per share, which would lift its yield to 2.3%, up from 2.2%.

Lockheed Martin LMT

Shares of Lockheed Martin have soared approximately 50% so far this year. This blows away its peer group’s—which includes the likes of Airbus EADSY, Northrop Grumman NOC, General Dynamics GD—14% upward movement and Boeing’s 18%. LMT reported strong results last quarter that helped management up its full-year guidance across all financial metrics. The Bethesda, Maryland-based global security and aerospace company also recorded a record $137 billion backlog. Going forward, Lockheed is set to benefit from increased U.S. government spending on next-generation technology.

The company announced just last week that it landed a NASA contract “for the production and operations” of six Orion spacecraft missions, with the ability to order up to 12. “This contract clearly shows NASA's commitment not only to Orion, but also to Artemis and its bold goal of sending humans to the Moon in the next five years," LMT’s Rick Ambrose said in prepared remarks.

Peeking ahead, LMT’s adjusted fiscal 2019 earnings are projected to surge 20.6% on 10.3% higher sales. The company’s 2020 earnings are then expected to climb 19% above our current-year estimate on 4.4% stronger revenues. Lockheed is Zacks Rank #2 (Buy) right now with a “B” grade for Momentum. Plus, the firm on September 26 authorized a new quarterly payout of $2.40 a share (payable on December 27), up from $2.20. Meanwhile, LMT’s current yield hovers at 2.27%.

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