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Morgan Stanley’s quant screen chooses dividend stocks to own and avoid

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Morgan Stanley’s quant screen chooses dividend stocks to own and avoid

Morgan Stanley ran a quantitative screen based on analyst research to identify best risk and reward among dividend-paying stocks.

“This methodology compares upside/downside to price target, projected dividend yields, and bull-bear spread, and 1-year volatility to optimize risk and return metrics,” Nicholas Lentini and team wrote in a note. “We then ran the final ‘To Own’ and ‘To Avoid’ stocks by our coverage analysts as a fundamental overlay.”

The lists “represent the top and bottom two deciles of total return (PT upside + dividend yield) stocks as ranked by our model,” he said.

The systematic top dividend stocks to own are:

  • Eastman Chemical ( EMN ), dividend yield 3%, total expected return 77%
  • LyondellBasell ( LYB ), 9%, 41%
  • Linde ( LIN ), 2%, 29%
  • Air Products and Chemicals ( APD ), 3%, 30%
  • Public Service Enterprise ( PEG ), 3%, 25%
  • FirstEnergy ( FE ), 4%, 36%
  • Vistra ( VST ), 3%, 35%
  • AES ( AES ), 3%, 27%
  • Crown Holdings ( CCK ), 1%, 42%
  • Visa ( V ), 1%, 44%
  • MasterCard ( MA ), 1%, 38%
  • AT&T ( T ), 6%, 29%
  • AbbVie ( ABBV ), 4%, 42%
  • Royalty Pharma ( RPRX ), 2%, 20%
  • Yum! Brands ( YUM ), 2%, 29%
  • Wells Fargo ( WFC ), 3%, 44%
  • Citizens Financial Group ( CFG ), 5%, 41%
  • Regions Financial ( RF ), 4%, 31%
  • Ross Stores ( ROST ), 1%, 37%
  • TJX ( TJX ), 2%, 24%
  • Ferrari ( RACE ), 1%, 51%
  • Energy Transfer ( ET ), 11%, 34%
  • Western Midstream ( WES ), 8%, 31%
  • Plains All American ( PAA ), 8%, 30%
  • Philip Morris ( PM ), 5%, 21%
  • Invitation Homes ( INVH ), 2%, 23%
  • Raytheon ( RTX ), 2%, 35%
  • Diamondback Energy ( FANG ), 9%, 36%
  • Microchip Technology ( MCHP ), 3%, 27%
  • Primoris Services ( PRIM ), 1%, 55%
  • Nike ( NKE ), 1%, 39%
  • Comcast ( CMCSA ), 3%, 39%
  • Microsoft ( MSFT ), 1%, 33%
  • CDW ( CDW ), 1%, 28%
  • Zoetis ( ZTS ), 1%, 66%

The stocks to avoid are:

  • Consolidated Edison ( ED ), 3%, -11%
  • Southern ( SO ), 4%, -8%
  • Caterpillar ( CAT ), 3%, -23%
  • Lumen Technologies ( LUMN ), 2%, -9%
  • Lazard ( LAZ ), 5%, -13%
  • American Eagle ( AEO ), 4%, -28%
  • Kohl’s ( KSS ), 5%, -30%
  • Urban Edge ( UE ), 4%, -9%
  • Lithia Motors ( LAD ), 1%, -20%
  • Penske Automotive ( PAG ), 2%, -22%
  • Group 1 Automotive ( GPI ), 1%, -23%
  • Sonic Automotive ( SAH ), 2%, -40%
  • FactSet ( FDS ), 1%, -23%
  • Brown-Forman ( BF.B ), 1%, -12%
  • Watsco ( WSO ), 3%, -26%
  • eBay ( EBAY ), 2%, -15%
  • UPS ( UPS ), 3%, -23%

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