Over the last two weeks investors have started taking profits on equity investments. Stocks have performed well in 2013 and as a result many stocks have reached fair value. Analysts have been taking down buy ratings at a much faster pace than they have been upgrading stocks.
Here’s a look at recent upgrades and downgrades on dividend stocks that have a yield of 2% or more. I’ve listed the reason for the new rating when it was available.
Upgrades
Duke Energy Corp (DUK)
Duke Energy as upgraded by Capital Markets from Sector Perform to Outperform on April 16th with a price target of $78 per share. The investment firm said Duke deserves a premium valuation due to above average earnings growth, high yield and constructive regulatory environments.
DUK has a dividend yield of 4.1% and a payout ratio of 75%. The company recently tripled its dividend payouts near the end of 2012 and has not had any distribution increases so far in 2013.
CSX Corp (CSX)
CSX Corp was upgraded by FBR Capital on April 12th from Market perform to Outperform. The reason for the upgrade was not available. CSX Corp was also upgraded in January by RBC Capital Markets.
CSX has a dividend yield of 2.5% and a payout ratio of just 31%. The company started paying dividends in 1922 and has increased its dividend for 8 years. It has a 5 year dividend growth rate of 25.25% which is outstanding. If that can be sustained it will drive the yield higher and improve the stock’s favorability on the street.
BB&T (BBT)
BB&T was upgraded by Compass Point on April 12th from Nuetral to Buy. Compass Point said the upgrade was based on the underperformance of BBT relative to its industry peers. Compass Point also emphasized the company’s history of profitable acquisitions and that it had not overextended itself on lending.
BBT has a dividend yield of 3.1% and a payout ratio of 38% which is well below its average payout ratio of 52% indicating more dividend increases ahead. The bank has been paying dividends since 1922 and has increased its dividend for 3 consecutive years.
CYS Investments (CYS)
CYS was also upgraded by Compass Point on April 12th from Neutral to Buy with a price target of $13.50. The reason for the upgrade was not available. This is a reversal from two months ago when Compass Point downgraded the stock.
CYS has a dividend yield of 10.5%. It’s a REIT so we are not concerned with the payout ratio. CYS has been paying dividends since 2009. The company has been cutting its dividend sharply over the last year.
United Parcel Service (UPS)
UPS was upgraded by RBC Capital Markets from Sector Perform to Outperform on April 18th with a price target of $100 a share. RBC said the upgrade was based on reduced product mix headwinds, share buybacks. RBC also sited potential catalysts from the USPS contract and the Teamsters contract.
UPS has a dividend yield of 3% and a 5 year dividend growth rate of 6.4%. The company started paying dividends in 1999 and has increased its dividend for 3 consecutive years.
Downgrades
Leggett & Platt (LEG)
Leggett & Platt was downgraded by Monness Crespi & Hardt from buy to neutral on April 19th. The investment firm said that LEG has reached fair value. The stock is up 20% in 2013 and over 40% in the last 12 months.
LEG has a dividend yield of 3.6% and a payout ratio of 68%. The company started paying dividends in 1939 and has increased its dividend for 42 consecutive years. LEG has a 5 year dividend growth rate of 6.1%. While the fundamentals are clearly strong the recent run in the stock price make this a very difficult entry point.
Coach Inc (COH)
Coach was downgraded on April 19th by Robert W. Baird from outperform to neutral with a new price target of $59 a share. Baird did make a reason for the downgrade available. There have been no other upgrades or downgrades on Coach in 2013.
COH has a dividend yield of 2.3% and a payout ratio of 33%. The company started paying dividends in 2009 and has increased its dividend each year since. It has a 3 year dividend growth rate of 61%.
Cott Corp (COT)
Cott Corp was downgraded by UBS on April 19th from buy to neutral with a price target of $11 per share. UBS said that the downgrade was based on valuation after the stock is up over 30% in 2013 and was up 65% in 2012.
COT has a dividend yield of 2.2% and a payout ratio of 24%. The company pays annual dividends and has not increased its dividend so far in 2013. .
Intel Corp (INTC)
Intel was downgraded by Arugs on April 11th from buy to hold. Argus stated that the downgrade was due to lower expectations for Intel in 2013 and poor performance in the PC industry.
Intel may just be the stock to hold due to its dependable dividend yield. The concern is over its growth. INTC has a yield of 4% and a payout ratio of 42%. The company has increased dividend payouts for 10 consecutive years and has a 5 year dividend growth rate of 14%. Surprisingly this dividend growth rate has not driven the stock price higher but has as a result increased the yield over the last 3 years.
St. Jude Medical (STJ)
St. Jude was downgraded by RBC Capital Markets from sector perform to underperform. RBC said the downgrade was based on the ICD survey that indicates market loss over the next couple years for the St. Jude. The firm does not believe St. Jude’s pipeline opportunities are enough to offset a potential loss.
STJ has a dividend yield of 2.3% and a payout ratio of 39%. The company first paid dividends in in 1992 but stopped paying out dividends just 3 years later. St. Jude resumed dividend payout in s2011 and has increased its dividend for 2 consecutive years.
Public Service Enterprise Group (PEG)
Public Service Enterprise Group was downgraded by Argus from buy to hold on April 8th. The reason for the downgrade was not available. There have been no other upgrades or downgrades on PEG in 2013. The stock is up 18% over the last 3 months.
PEG has a dividend yield of 4% and a payout ratio of 57%. The company has increased its dividend for one year after pausing dividend increases in 2011. PEG has a 5 year dividend growth rate of 3.5%.
Bank of Hawaii Corp (BOH)
Bank of Hawaii was downgraded by RBC Capital Markets on April 9th from outperform to sector perform. The reason for the downgrade was not made available. The only other firm to weigh in on BOH in 2013 is Barclays with a rating of market perform.
BOH has a dividend yield of 3.7% and a payout ratio of 49%. The company has been paying dividends for over 100 years but has not increased its dividend since 2009.
