Morgan Stanley goes to bat for dividend-paying stocks in a
U.S. equity research report this week. In a nutshell, MS argues the payout ratio
of dividend stocks is near an all-time low and could increase substantially from
here and still remain low by historical standards. In a week when ten-year
Treasury yields are breaching new historic lows, dividend yields are
increasingly attractive by comparison. And despite looming threats to dividend
taxation rates, there’s no compelling reason to bail on dividend stocks for that
reason at this point.
MS recommends investors continue to overweight utilities and health care,
despite the fact that the defensive sectors have now been the best performers
for the past three months. MS recommends underweights in consumer discretionary
and industrials, and says it’s removing Exxon Mobil Corp. (XOM) and Union Pacific
Corp. (UNP)
from its portfolio and adding AT&T Inc. (T), which moves MS to market-weight in
telecoms and underweight industrials.
Beyond that, MS lists some current high-yielding stocks that it labels safe
and “fundamentally and quantitatively attractive,” including Chevron
Corp. (CVX),
MetLife Inc. (MET),
Freeport-McMoRan Copper & Gold Inc. (FCX), Franklin Resources
Inc. (BEN), Cardinal Health
Inc.(CAH), Fifth Third Bancorp (FITB), St. Jude
Medical (STJ)
and Staples Inc. (SPLS).
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