As the stock market continues to soar to new heights, savvy investors are on the hunt for quality companies that offer a sweet spot of value and dividend yield. Despite the impressive gains of 2023, there are still opportunities to snag shares of top-notch companies at a reasonable price relative to earnings. Three hidden gems that fit the bill are Honeywell International, Phillips 66, and Delta Air Lines.
Honeywell International, a stalwart in the industrial sector, has been quietly revamping its business strategy under new CEO Vimal Kapur. With a focus on megatrends like automation and the energy transition, Honeywell is poised to reignite its growth engine. The company’s commitment to boosting shareholder value through dividends, acquisitions, and buybacks is music to investors’ ears. At a price-to-earnings ratio below its five-year median, Honeywell’s stock is ripe for the picking.
Phillips 66, a midstream and downstream energy operator, has taken a hit in recent months as oil prices have declined. However, this sell-off presents a golden opportunity for forward-thinking investors to snag a juicy 3.5% dividend yield. Despite lower operating cash flow, Phillips 66 has achieved impressive cost reductions and high crude utilization rates. As energy prices rebound, so will the stock.
Delta Air Lines, often overlooked in the airline industry, is a value play waiting to happen. Trading at a mere 7.7 times estimated 2024 earnings, the stock is a steal. Concerns about debt and cyclicality are overstated, as management is committed to paying down debt and the industry has shown restraint in capacity growth. With interest rates set to decline, Delta Air Lines is poised to benefit from increased consumer spending and corporate travel.
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