Stocks climbed in morning trading on the last day of the second quarter to finish off what has been a wild three-month stretch for the market. The tech-heavy Nasdaq has returned to new highs and the S&P 500 has come somewhat near its pre-coronavirus levels. Despite the impressive run for the market, fears about spikes in Covid-19 cases in the parts of the U.S. have some on Wall Street nervous.
Politicians in states such as California, Texas, Arizona, and elsewhere have reversed some reopening plans, as Disney DIS postpones the reopening its California park and Apple AAPL shuts down more stores. That said, stocks surged Monday on the back of better-than-expected pending home sales, which helped highlight May’s economic comeback from what appears to be rock-bottom in April.
The Dow, the S&P 500, and the Nasdaq are all finishing up their best quarter in years, but June marked a major slowdown and a return to some volatility. In fact, the S&P 500 has moved almost completely sideways in June but is still up over 37% since March 23.
It’s unclear where the market will go if the coronavirus spikes and constant negative headlines continue. However, the political will for a second broad-based lockdown likely isn’t there unless things get far worse. Plus, Wall Street is ready to remain in don’t fight the Fed mode.
With all this in mind, let’s dive into three stocks with solid dividend yields that appear ready to continue to weather the coronavirus economic downturn in the second half of 2020…
AbbVie’s portfolio features one of the world’s top-selling drugs, Humira. The company’s patent protections for Humira are running out outside of the U.S., even though biosimilars won’t hit the U.S. for at least a few years. The pharmaceutical giant has seen this coming and prepared for the future and it officially completed in early May its $63 billion acquisition of Allergan plc. Wall Street has seemed pleased with the Allergan deal that adds Botox and other popular beauty-focused drugs to its expanding roster.
AbbVie’s therapeutics span a wide variety of illnesses and its R&D pipeline is strong. ABBV shares have surged 50% from the market’s March 23 lows to outpace its industry’s 29%. The stock is now up 30% in the past 12 months to crush the Drug Market’s 4% expansion. Luckily for investors, AbbVie still rests 15% below its early 2018 highs and it trades right in-line with its highly-ranked industry’s average. ABBV sports an “A” grade for Value and a “B” for Growth in our Style Scores system.
AbbVie’s 4.87% dividend yield blows away its industry’s 2.89% average, as well as Pfizer’s PFE 4.70%, Merck’s MRK 3.18%, and Eli Lilly’s LLY 1.82%. Peeking ahead, our Zacks estimates call for AbbVie’s revenue to surge 36.5% in FY20 and another 17.5% in FY21, driven in part by its Allergan deal. Plus, ABBV’s adjusted FY20 earnings are projected to jump 18% and another 14.2% higher next year. And AbbVie’s positive earnings revisions help it hold a Zacks Rank #2 (Buy) right now.
Microsoft appears to be a relatively straightforward choice for the second half of 2020 and beyond even compared to other tech giants such as Apple and Amazon AMZN. MSFT has outgained all of the FAANG stocks over the last two years, up 100% and it sits just off its new all-time highs. The company’s expansion into cloud computing has driven its impressive run over the last several years and it’s also what makes it somewhat immune to the coronavirus economic downturn. The firm’s Intelligent Cloud revenue jumped 27% for the second period in a row last quarter and it pulled in the most of its three units in Q3 FY20.
MSFT’s cloud business is poised to expand within the booming market. Meanwhile, the historic tech firm’s Office-heavy Productivity and Business Processes segments continue to grow and its Office 365 suite remains vital to businesses, governments, schools, and consumers. Plus, its Teams platform has grabbed the stay-at-home spotlight alongside the likes Zoom ZM. And its consumer electronics and video gaming units present longer-term opportunities as well.
Looking ahead, MSFT’s revenue is projected to jump 12.5% in FY20 and another 10% next year. Microsoft is set to grow during these uncertain times and is positioned to weather nearly any economic storm, as it held over $137 billion in cash and equivalents at the end of last quarter. It has also bought back a ton of stock and it continues to up its dividend, with its current 1.01% yield topping the 10-year U.S. Treasury’s 0.65% and Apple’s 0.90%. Microsoft is currently a Zacks Rank #3 (Hold) that sports a “B” grade for Growth.
Lockheed Martin LMT
Lockheed is a global aerospace powerhouse that largely maintained its fiscal 2020 guidance last quarter despite the broader economic downturn and unknowns. LMT is one of the world’s biggest defense contractors and is ready to benefit from Pentagon spending for years to come. The stock is up 31% in the last three years to top its peer group’s 16% decline, weighed down by Boeing’s BA recent setbacks.
LMT also trades at a discount compared to its Aerospace – Defense industry’s average, which helps it earn a “B” grade for Value. Lockheed also rocks an “A” grade for Growth, with its revenue projected to climb 6.2% this year and another 5.2% in the following year. This growth would compare favorably to its 2018 and 2017 top-line expansion. Meanwhile, its adjusted fiscal 2020 EPS figure is expected to jump by 9.6%, with FY21 set to come nearly 11% higher.
Lockheed is currently a Zacks Rank #2 (Buy) with a 2.63% dividend yield that easily tops its industry’s 0.88% average, as well as Northrop Grumman’s NOC 1.89%. The stock currently rests 18% off its 52-week highs, which could give it room to run in the second half of 2020. And Lockheed is less impacted by near-term economic worries and largely immune from consumer spending concerns.
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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Pfizer Inc. (PFE) : Free Stock Analysis Report
Merck Co., Inc. (MRK) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
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