Buy Alert: Should You Buy These 3 Dogs of the Dow?
October 11 2021 - 7:19AM
Finscreener.org
The Dow Jones Industrial Average
is up nearly 15% year-to-date and has been hovering around the same
levels since August this year. However, there are some stocks on
the popular index that are lagging the benchmark by a fair
margin.
These could be construed as
bargain buys in the current scenario where savvy investors hunt for
good companies that have hit a rough patch but will bounce back in
due course.
Let’s take a look at three such
Dogs of the Dow stocks on the DJIA Index.
Amgen
A pharmaceutical company that
opted out of the COVID-19 vaccine race, Amgen (NASDAQ:
AMGEN)
has grossly underperformed the Dow Jones Industrial Average in the
first nine months of 2021. But it meant that the stock didn’t
experience volatility on every COVID-19 update. However, this also
meant that the stock has hardly moved since March
2020.
It closed at $202.7 on March 1,
2020, and closed on October 8, 2021, at $209. The stock is down 7.81% year to date
and revenue for 2020 came in at
$25.42 billion, up from $23.36 billion in 2019.
Amgen is a steady dividend
player. It has increased its dividend by 76% in the last five
years, and the fall in its stock price has caused its forward yield
to go up to 3.37% from 2.27% in recent years. The company had no
problems paying out dividends throughout the pandemic and its
earnings for 2020 ($7.26 billion) is proof that it has done well
despite testing times.
The average target price for
Amgen by analysts is $248.18, a potential upside of almost 19% from
its current price. This stock could be a smart buy as
dividend-adjusted returns will be closer to 23%.
3M
3M (NYSE: MMM) is that
rare stock which is a staple in the consumer as well as the
industrial world. It makes post-it notes and scotch tape but it
also makes food-safety testing materials and reflective materials
for road safety. 3M produces over 60,000 products and sells them
across the world.
However, the real reason to buy
the company is that it is one of the most consistent dividend
payers in the market today with a forward yield of 3.35%. It hasn’t
missed a single dividend payment in a century and has increased
dividends each year for 63 years. The stock has moved up just a
shade lower than 3% this year, and closed October 8 at
$176.95.
Analysts have an average target
price of $195.01 for 3M which is an upside of just over 10% from
current levels. When you add in the dividend payout, it makes for a
good buy.
Caterpillar
Caterpillar (NYSE:
CAT) is a stock that is
up just 7.14% this year. It was up a lot more in the year when it
closed at $244.02 on May 31, 2021, but it has been on a steady
decline since then after falling victim to supply chain concerns
that are plaguing the world. However, the stock could be turning a
corner soon.
JP Morgan wrote to its investors
on October 8 saying that Caterpillar is their top pick going into
2022. "We believe CaterpillarU+02019s earning power and free cash
flow conversion over this upcoming cycle, supported by solid global
GDP growth, continue to merit our Overweight rating," said JPMorgan
analysts Anne Duignan, Thomas Simonitsch and Sean P
McMullen.
The company produces and sells
construction and mining equipment, diesel and natural gas engines,
and industrial gas turbines across the world, all industries that
have been hampered by the pandemic and supply chain
breakages.
As economic recovery slowly
gains, Caterpillar’s industries will get back to normal activity.
Further, as construction activity resumes around the world,
Caterpillar stock will likely rebound. In the US, President Joe
Biden’s plan $2 trillion infrastructure plan will also play a key
role in boosting Caterpillar stock which closed at $195.16 on
October 8.
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