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3 Buy-Rated S&P 500 Stocks to Scoop Up Near 52-Week Lows

Barchart - Tue Oct 10, 2023

The S&P 500 Index ($SPX) has pulled back about 5% from its late-July highs amid heightened market volatility in recent months, and there are now many blue-chip stocks trading at relatively depressed valuations. As equity markets look to find their footing amid ongoing macro uncertainty, investors can consider buying the dip on companies that are well-positioned to maintain cash flows and earnings amid this challenging environment. 

Here are three buy-rated S&P 500 stocks you can consider buying as they trade near their lowest prices of the last 52 weeks.

Bristol-Myers Squibb

A healthcare heavyweight, Bristol-Myers Squibb (BMY) is valued at a market cap of $118.26 billion. The company invested $9.5 billion in research and development in 2022 as it continues to target multiple healthcare verticals. In fact, Bristol-Myers has close to 50 compounds under development and is studying more than 40 diseases, which should unlock additional revenue streams in the future.

The shares are down 14% over the past year, but appear to be finding a floor in the area of their newly established 52-week low of $55.69.

In the first six months of 2023, its existing product line grew sales by 2% to $17.3 billion. Comparatively, BMY’s new product line almost doubled revenue year over year to $1.6 billion. Its widening revenue base and cash flows allow Bristol-Myers to pay shareholders an annual dividend of $2.28 per share, indicating a forward yield of 4%. 

Moreover, the company has increased these payouts by 8.6% annually, on average, in the last 49 years. With a payout ratio of less than 60%, BMY has enough room to increase dividends, reinvest in capital projects, and strengthen its balance sheet

Plus, priced at 7.6 times forward earnings, BMY is quite cheap. 

Out of the 18 analysts covering BMY, seven recommend “strong buy,” 10 recommend “hold,” and one recommends “strong sell.” The average target price for BMY is $70.57, which is 24.8% above current prices.

United Parcel Service

Valued at a market cap of $131.87 billion, United Parcel Service (UPS) is a packaged delivery giant that is now down 29% from its all-time highs - and not too far above its newly set 52-week low of $150.54. However, the pullback has increased its dividend yield to a tasty 4.13%.

In Q2 of 2023, UPS wrestled with worker contract issues and sluggish consumer spending, leading to a 10% decline in average daily volume in the U.S. Its revenue was down 11% year over year, while earnings per share narrowed by 23%. 

However, priced at 16.5x forward earnings, UPS is cheap - and the company is forecast to increase earnings by 11% in 2024. 

Moreover, UPS continues to focus on lowering its cost base by leveraging technology. Around 57% of goods in the U.S. were part of automated hubs, up from 53% in the last year. A lower-cost environment should allow UPS to increase cash flows and dividends. The company has raised dividends by 10.8% annually in the past 20 years. 

Out of the 23 analysts covering UPS, nine recommend “strong buy,” 12 recommend “hold,” and two recommend “strong sell.” The average target price for UPS is $181, which is 16% above current prices.

Waste Management

The final S&P 500 stock on my list is Waste Management (WM), which has added just 2.4% over the past year - though the stock has bounced sharply already since hitting a low of $149.71 earlier this month, not far from its 52-week low point of $148.31.

A garbage disposal company, Waste Management has returned 381% to shareholders since October 2013, after adjusting for dividends. As part of a recession-resistant industry, Waste Management generates stable cash flows. It enjoys a wide economic moat due to a leadership position, and expects to double free cash flow to $4 billion by 2027. 

Waste Management has vertically integrated its core assets, which include landfills, material recovery hubs, gas-to-energy facilities, and garbage collection routes. Its wide network of garbage disposal operations allows Waste Management to collect by-products, which it converts into fuel. This fuel is then used by Waste Management vehicles to cover 74% of its driving routes. 

WM offers shareholders a dividend yield of 1.75%, and these payouts have risen by 6.55% annually in the last 15 years. 

Out of the 14 analysts covering WM, six recommend “strong buy,” one recommends “moderate buy,” and seven recommend “hold.” The average target price for WM is $180.67, which is 15% above current prices.

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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