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High dividend yield stocks can boost investors’ portfolio income – if they’re willing to take some risk – and Wells Fargo Investment Institute has a list of its favorite picks. Dividend-paying stocks offer investors a combination of potential price appreciation and income today, which can enhance returns and provide some cushion during volatile times. Investors with a long-term perspective can get even more mileage out of their dividend-paying stocks by reinvesting the income they generate. “Potential dividend income can only be positive from a return perspective, and investors are therefore not completely reliant on capital appreciation for portfolio growth,” wrote Thomas Christopher, a Wells Fargo Investment Institute analyst, in a report last week. There is a catch with high-yield dividend payers, however: Higher yields can be an indication that a company’s share price is under pressure. Further, a company that offers a high dividend yield may be more likely to cut the payment when times get tough. With that said, Christopher and his team compiled a list of high-yield equity income names based on an array of factors, including stable business models with cash flows to support the dividend, a higher-than-average yield and sustainability based on a company’s five-year dividend per share growth rate. Here are a few of the names Wells Fargo highlighted. Chevron , a top pick in Wells Fargo’s integrated oils coverage, made the high dividend yield list. Shares are up more than 5% in 2024, and the stock pays a dividend of 4.2%. Wells analyst Roger Read has an overweight rating on the country’s second-largest oil producer, and his price target of $206 implies upside of 31%. His team lowered its share repurchase forecast for the second half to $4 billion from $5 billion per quarter, with the earlier estimate based on an expectation of a mid-2024 closing for Chevron’s merger with Hess. The time frame around that deal has been delayed now that the companies are in a dispute with Exxon Mobil over assets in Guyana. “Biggest open item remains the approved merger with Hess Corp (HES) clearing the arbitration hurdle in coming months,” Read wrote in a report this month. Wells Fargo Investment Institute also highlighted PepsiCo in its high dividend yield screen. The Gatorade and Quaker Oats maker recently posted second-quarter adjusted earnings that came in ahead of Wall Street’s expectations, while revenue trailed estimates. Earlier this month, Jefferies lowered its price target to $200 from $210, pointing to a “snacking slowdown” in Pepsi’s Frito-Lay snack unit. “We still like the business as prices are unlikely to revert to pre-inflation levels, underwriting a margin story (flat since ’22),” wrote Jefferies analyst Kaumil Gajrawala in a July 9 report. The updated price target suggests 19% upside from Monday’s close. PepsiCo shares are down about 1% in 2024, and the stock has a dividend yield of 3.2%. In the communication services sector, Wells Fargo Investment Institute called out Omnicom Group . The marketing and media company offers a dividend yield of 3.1%, and shares are up 6% in 2024. Last week, Omnicom posted second-quarter results. Adjusted earnings came in at $1.95 per share, in line with consensus expectations, according to FactSet. However, revenue was slightly higher than what analysts called for, coming in at $3.85 billion versus the Street’s consensus estimate of $3.83 billion. The stock is a favorite on Wall Street, with 10 of the 13 analysts covering Omnicom rating it a buy or strong buy, according to LSEG. Other names on Wells Fargo’s high dividend yield list include Medtronic , Lockheed Martin and Cisco Systems .
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