2020 Large Cap Stocks List Sure Dividend

Sure Dividend

High-Quality Dividend Stocks, Long-Term Plan
The Sure Dividend Investing MethodMember's Area

2020 Large Cap Stocks List


Updated on November 13th, 2020 by Bob Ciura

It is likely that at some point, investors have come across the term market capitalization (or market cap), although many investors may not know what the term means. But the concept of market capitalization is very straightforward.

Market capitalization simply refers to the total value of a company’s outstanding stock. It is calculated by multiplying a company’s shares outstanding by its current share price. Put differently, market capitalization is how much money it would cost to buy every outstanding share of a publicly-traded company.

The biggest stocks, with market caps above $200 billion, are called mega-cap stocks. Just below mega-caps are called large caps.

Large-cap stocks represent businesses with market caps between $10 billion and $200 billion. There are hundreds of large-cap stocks to choose from. With this in mind, we have compiled a list of over 400 large-cap stocks in the S&P 500 Index, with market caps of $10 billion or more.

You can download your free copy of the large-cap stocks list, along with relevant financial metrics like price-to-earnings ratios, dividend yields, and payout ratios, by clicking on the link below:

 

This article will discuss large cap stocks, and an analysis of our top 10 large-cap stocks, ranked according to expected total returns in the Sure Analysis Research Database.

Table of Contents

You can instantly jump to any specific section of the article by clicking on the links below:

Overview of Large-Cap Stocks

To calculate a stock’s market capitalization, simply multiply the share price by the number of outstanding shares. For example, a stock with a share price of $100 and 1 million shares outstanding, will have a market capitalization of $100 million. While this is certainly a lot of money, in terms of the stock market, this stock would qualify as a micro-cap.

Stocks classified by market capitalization are separated into multiple tiers. At the bottom is micro-caps—these are very small companies with market capitalizations below $300 million. Next are small caps, which have market capitalizations of $300 million to $2 billion.

After small caps, investors can choose to buy mid-cap stocks, which generally have market capitalizations of $2 billion to $10 billion.

Finally, there are large-cap stocks, which have market capitalizations above $10 billion. Investors are likely familiar with large-cap stocks, as these are the kinds of companies that populate the most well-known index, the Dow Jones Industrial Average.

The Top 10 Large Cap Stocks To Buy Right Now

With all of the above in mind, we created a list of over 400 stocks that each have market capitalizations above $10 billion. But for long-term income investors, these stocks must be filtered down to the best buys today.

The following 10 stocks represent large-caps with market capitalizations above $10 billion, but they also have durable competitive advantages, long-term growth potential, and all pay dividends to shareholders. Some have increased their dividends each year, for many years.

These 10 stocks are ranked by five-year expected total returns. A qualitative assessment of their business models and growth potential was also applied. Because of this, no MLPs were included in the rankings, due to their unique risk factors.

In addition, no more than 3 stocks from any individual sector were included in the top 10 list, to ensure diversification of the list.

Finally, only stocks with Dividend Risk scores of C or better were included. This step was taken to focus on stocks with sustainable payouts in addition to their high yields. Stocks are ranked by 5-year annual expected return, from lowest to highest.


Top Large Cap #10: Franklin Resources (BEN)

Franklin Resources, founded in 1947 and headquartered in San Mateo, CA, is a global asset manager with a long and successful history. The company offers investment management (which makes up the bulk of fees the company collects) and related services to its customers, including sales, distribution, and shareholder servicing. As of September 30th, 2020, assets under management (AUM) totaled $1.42 trillion for the company.

On February 18th, 2020 Franklin Resources announced that it had entered into a definitive agreement to acquire Legg Mason (LM) for $4.5 billion in cash, to go along with the assumption of $2 billion in debt. When announced,the deal would create a combined $1.5 trillion asset manager.

On October 27th, 2020 Franklin Resources reported Q4 and full year fiscal 2020 results for the period ending September 30th, 2020. Total assets under management equaled $1.419 trillion, a 105% increase from last quarter, driven by a $797.4 billion gain from the Legg Mason acquisition, a positive $22.4 billion change net market value and -$23.7 billion of net outflows. Negative net flows are an item Franklin Resources has faced for several quarters in a row.

For the quarter, operating revenue totaled $1.705 billion. This figure represented 0.14% of average AUM or ~56 basis points on an annualized basis. On an adjusted basis net income equaled $291 million or $0.56 per share versus $358.4 million or $0.71 per share.

For the year, Franklin Resources generated operating revenue of $5.57 billion compared to $5.67 billion in fiscal year 2019. This figure represented 0.67% of average AUM for the year. Adjusted net income totaled $1.311 billion or $2.61 per share versus $1.331 billion or $2.62 per share prior.

The combination of an expanding price-to-earnings multiple, 4% expected annual EPS growth, and the 5.3% dividend yield leads to total expected returns of 13.1% per year over the next five years.


Top Large Cap #9: Cisco Systems (CSCO)

Cisco Systems is the global leader in high performance computer networking systems. The company’s routers and switches allow networks around the world to connect to each other through the Internet. Cisco also offers data center, cloud, and security products. Cisco is a large-cap stock with a market cap of $152 billion.

As a global company exposed to general economic forces, Cisco has not been immune from the coronavirus crisis. Cisco reported challenged results for the most recent quarter including a 9% revenue decline. Product revenue declined 13%, while service revenue increased 2% year-over-year. Adjusted earnings-per-share declined 10% for the fiscal 2021 first quarter.

Source: Investor Presentation

Making matters worse is that Cisco issued a disappointing outlook for the current quarter. Cisco expects second-quarter revenue in a range of flat to down 2%.

With everything from computers to cell phones to buildings connected today, Cisco is in a prime position to capitalize on the Internet of Things. In fact, Cisco is responsible for 80% of all the data moved over the internet in the past 30 years. Cisco’s dominance in hardware such as routers and switching products is a major competitive advantage.

Cisco performed surprisingly well in the Great Recession. From 2007-2010, Cisco’s earnings-per-share actually grew 14% over this period. The company also maintained its dividend throughout the recession, and steadily increased its dividend in the decade following the end of the Great Recession.

Cisco continues to see strong long-term trends which have fueled impressive growth in recent periods, and will likely continue in the years ahead. For example, security sales increased 10% for the quarter as demand for network security, identify and access, advanced threat and unified front management products remained strong. Separately, Cisco saw strong growth for AppDynamics and the Internet of Things.

The combination of expected EPS growth, multiple expansion and the 3.7% dividend yield combine for total expected returns of 13.2% per year over the next five years for Cisco stock.


Top Large Cap #8: AT&T Inc. (T)

AT&T is the largest communications company in the world, operating in three distinct business units: AT&T Communications (providing mobile, broadband and video to 100 million U.S. consumers and 3 million businesses); WarnerMedia (including Turner, HBO, Warner Bros. and the Xandr advertising platform); and AT&T Latin America (offering pay-TV and wireless service to 11 countries).

In the 2020 third quarter, AT&T generated revenue of $42.3 billion, along with operating cash flow of $12.1 billion. Among the highlights, AT&T recorded more than 5 million total domestic wireless net adds along with over 1 million postpaid net additions. The company’s postpaid churn was an impressive 0.69% for the quarter.

AT&T still expects free cash flow of at least $26 billion for the full year. This will help the company continue to invest in growth, pay dividends to shareholders, and also pay down debt. AT&T’s net debt-to-EBITDA ratio was ~2.66x at the end of the quarter.

Source: Investor Presentation

AT&T is a colossal business, but it is not a fast grower. From 2007 through 2019 AT&T grew earnings-per-share by 2.2% per year. While the company is picking up growth opportunities, notably in its recent acquisition of Time Warner, we recognize the premiums paid and the fact that the company’s legacy businesses are steady or declining. AT&T is optimistic about generating reasonable growth and the payout ratio had been falling, resulting in excess funds to divert toward paying down debt.

Two individual growth catalysts for AT&T are 5G rollout and its recently-launched HBO Max service. AT&T continues to expand 5G to more cities around the country. On June 29th, AT&T announced it had turned on 5G service to 28 additional markets. AT&T now provides access to 5G to parts of 355 U.S. markets, covering more than 120 million people.

On May 27th, AT&T launched streaming platform HBO Max and generated 90,000 mobile downloads on its first day. HBO Max is priced at $15 per month and offers subscribers approximately 10,000 hours of programming. The new platform is a critical step for AT&T to keep up in the streaming wars.

Shares of AT&T trade for a 2020 price-to-earnings ratio under 9, which is below our fair value P/E of 12. The stock also has an attractive dividend yield of 7.3%. Combined with 3% expected annual earnings-per-share growth, we expect total annual returns of 13.2% per year over the next five years.


Top Large Cap #7: Altria Group (MO)

Altria Group is a consumer products giant. Its core tobacco business holds the flagship Marlboro cigarette brand. Altria also has non-smokable brands Skoal and Copenhagen chewing tobacco, Ste. Michelle wine, and owns a 10% investment stake in global beer giant Anheuser Busch Inbev (BUD).

Related: The 6 Best Tobacco Stocks Now, Ranked In Order

Altria is a legendary dividend stock, because of its impressive history of steady increases. Altria has raised its dividend for 51 consecutive years, placing it on the very exclusive list of Dividend Kings.

On October 30th, Altria reported financial results for the 2020 third quarter. Revenue (net of excise taxes) of $5.7 billion increased 5% year-over-year, and beat analyst estimates by $140 million. Smokeable volumes declined 0.2% for the quarter, much better than the 4% predicted drop. On a GAAP basis, Altria reported a loss of -$0.51 per share, as the company took a non-cash pre-tax impairment charge of $2.6 billion related to its investment in JUUL.

However, adjusted earnings-per-share came to $1.19 per share, beating estimates by $0.03 per share. Better-than-expected declines in smokeable volumes helped Altria’s third-quarter performance.

Source: Investor Presentation

Altria also raised the low end of its full-year guidance for adjusted earnings-per-share, now expecting a range of $4.30 to $4.38, from prior guidance of $4.21 to $4.38.

Altria’s key challenge going forward will be to generate growth in an era of falling smoking rates. Consumers are increasingly giving up traditional cigarettes, which on the surface poses an existential threat to tobacco manufacturers. Altria expects cigarette volumes will continue to decline at a 4% to 6% annual rate through 2023.

For this reason, Altria has made significant investments in new categories, highlighted by the $13 billion purchase of a 35% stake in e-vapor giant JUUL. This acquisition gives Altria exposure to a high-growth category that is actively contributing to the decline in traditional cigarettes.

Altria also recently announced a $1.8 billion investment in Canadian marijuana producer Cronos Group. Altria purchased a 45% equity stake in the company, as well as a warrant to acquire an additional 10% ownership interest in Cronos Group at a price of C$19.00 per share, exercisable over four years from the closing date.

Altria is also highly resistant to recessions. Cigarette and alcohol sales fare very well during recessions, which keeps Altria’s strong profitability and dividend growth intact. With a target dividend payout of 80% of annual adjusted EPS, Altria’s dividend appears secure. The combination of dividends, expected EPS growth, and valuation changes results in total expected returns of 13.2% per year.


Top Large Cap #6: Lockheed Martin (LMT)

Lockheed Martin is the world’s largest defense company. About 60% of the company’s revenue comes from the U.S. Department of Defense, with other U.S. government agencies (10%) and international clients (30%) making up the remainder.

The company consists of four business segments: Aeronautics (~40% of sales) which produces military aircraft like the F-35, F-22, F-16and C-130; Rotary and Mission Systems (~26% sales) which houses combat ships, naval electronics and helicopters; Missiles and Fire Control (~16% sales) which creates missile defense systems; and Space Systems (~17% sales) which produces satellites.

Lockheed Martin reported another excellent quarter for Q3 2020 on October 20th, 2020. Company-wide net sales increased 9% to $16.5 billion and diluted earnings per share increased 10% year-over-year. All four business segments increased net sales. The Aeronautics and Rotary & Mission Systems segments each increased net sales 8% while the Missiles and Fire Control segment increased sales 14% to lead the way. The Space segment added 6% sales growth for the quarter.

Source: Investor Presentation

Lockheed Martin’s backlog is at a record of approximately $150.45 billion, driven by increases in Aeronautics, Missiles and Fire Control, and Rotary and Mission Systems offset by a decline in Space sales. Lockheed Martin’s earnings per share growth comes largely on the strength of F-35 production, tactical and strike missiles, satellite and missile defense programs, and the Sikorsky acquisition. We now expect earnings per share to grow on average at 10% per year.

Lockheed Martin is an entrenched military prime contractor. It produces aircraft and other platforms that serve as the backbone for the U.S. military and other militaries around the world. This leads to a competitive advantage as any new technologies would have to significantly outperform extant platforms. These platforms have decades-long life cycles and Lockheed Martin has expertise and experience to perform sustainment and modernization.

The combination of P/E expansion, 10% expected EPS growth and the 2.8% dividend yield to generate 13.5% annualized total returns over the next five years.


Top Large Cap #5: Northrop Grumman (NOC)

Northrop Grumman is one of the five largest U.S. aerospace and defense contractors based on revenue. The company reports four business segments: Aeronautics Systems (aircraft and UAVs), Mission Systems (radars, sensors and systems for surveillance and targeting), Defense Systems (information technology, sustainment and modernization, directed energy, tactical weapons),and Space Systems (missile defense, space systems, hypersonics and space launchers).

Northrop Grumman generated nearly $34 billion of revenue in 2019.

Source: Investor Presentation

The company reported strong third-quarter results on October 22,2020. Company-wide revenue increased 7% to $9.1 billion, while adjusted earnings per share increased 7% to $5.89 from $5.49 on a year-over-year basis. Revenue for Aeronautics Systems increased 5% due to higher volumes in restricted programs, E-2D, and F-35 offset by a reduction in A350. Revenue for Defense Systems declined 4% but increased 10% for Mission Systems and 17% for Space Systems.

Northrop Grumman’s total backlog increased to a record $81.3 billion, due to major contract wins of $20.3 billion in the quarter. The book-to-bill ratio is a very healthy 2.2X. Earnings-per-share guidance was increased to $22.25-$22.65.

Looking forward, the company will achieve both revenue and EPS growth through its involvement in the F-35, B-21, E2-D and other platforms. We expect average annual EPS growth of 10% out to 2025.

As a major U.S. defense contractor, Northrop Grumman has an entrenched position in many of its end markets. Of note are the B-2, B-21, E-2D, E-8C, Global Hawk and Triton platforms. These platforms have decades long life cycles and Northrop Grumman has the expertise and experience to perform sustainment and modernization. These characteristics lead to a good degree of recession resistance.

The stock has a P/E ratio of 14.0, below our fair value estimate of 15.0. The stock also has a 1.9% dividend yield. Including expected EPS growth, total returns are expected to reach 13.7% per year over the next five years.


Top Large Cap #4: General Dynamics (GD)

General Dynamics is an aerospace & defense company that operates five business segments: Aerospace (23% of sales), Combat Systems (17%), Marine Systems (23%), Information Technology (23%), and Mission Systems (13%). The company’s Aerospace segment is focused on business jets and services while the remainder of the company is defense. The company makes the well-known M1 Abrams tank, Stryker vehicle, Virginia-class submarine, Columbia-class submarine, and Gulfstream business jets. General Dynamics had revenue of nearly $40 billion last year.

The company reported third-quarter results on October 28th. Total revenue declined 3.4% year-over-year, while diluted earnings-per-share declined 7.6%. Declines again resulted from weakness in Aerospace, Information Technology, and Mission Systems. The backlog is declining and is now $11.96 billion.

Source: Investor Presentation

New orders have strengthened, and the book-to-bill ratio rose to 0.92x. Revenue increased 3.5% for Combat Systems and 7.6% for Marine Systems. Information Technology revenue declined 2% while Missions Systems was flat for the quarter.

General Dynamics is an entrenched military prime contractor. It has ground and marine platforms that serve as the backbone for the U.S. Army, U.S. Navy and militaries around the world. This leads to a competitive advantage as these platforms have decades long life cycles and General Dynamics has expertise and experience to perform sustainment and modernization. These characteristics lead to a good degree of recession resistance. For example, from 2008-2010 General Dynamics increased its earnings-per-share by 11% over this period known as the Great Recession.

We expect 6% annual earnings-per-share growth over the next five years. This earnings-per-share growth will be achieved through a combination of rising revenue as well as share repurchases. General Dynamics top and bottom lines are growing due to increasing U.S. defense spending and international sales.

The business jet market is being negatively impacted in the near-term due to COVID-19 and travel restrictions, but defense remains a much bigger portion of General Dynamics’ revenue and earnings. General Dynamics has established naval and ground platforms that support maintenance and modernization contracts, as well as future prime contract wins.

General Dynamics has increased its dividend for 28 consecutive years, which makes it a Dividend Aristocrat. Continued dividend growth is very likely for many years, due to the company’s durable competitive advantages and market leadership. The combination of expected EPS growth, dividends, and expansion of the P/E multiple lead to total expected returns of 14.5% per year through 2025.


Top Large Cap #3: Intel Corporation (INTC)

Intel is the largest manufacturer of microprocessors for personal computers, shipping about 85% of the world’s microprocessors. Intel also manufactures products like servers and storage devices that are used in cloud computing. Intel employs more than 100,000 people worldwide and has a current market capitalization above $180 billion. The company generates $70+billion in annual sales.

On 10/19/2020, Intel announced that it was selling its Nand memory unit to SK Hynix for approximately$9 billion.

On 10/22/2020, Intel announced third quarter earnings results. Revenue fell 4.7% to18.3 billion, but was $40 million higher than expected. Adjusted earnings-per-share of $1.11 was in-line with estimates but 18% lower than the previous year.

Source: Investor Presentation

The company’s PC-Centric business grew 1% to $9.8 billion due to strength in the notebook product line as consumers continue to deal with the work-and learn-at-home environment. Intel’s data-centric businesses fell 10% to $8.4 billion. Data Center Group was down 7% to $5.9 billion, below consensus estimates of $6.2 billion.

While cloud revenue growth was strong at 15%, COVID-19 impacted demand in the segment’s enterprise and government market. Sales from this end market were down 47%. The Internet of Things Group decreased 33% to $677 million also due to the ongoing pandemic. Mobileye was up 2% to $234 million, but 60% sequentially due to improvements in global vehicle production.

Intel’s memory business fell 11% to $1.2 billion due to weaker demand, but this was partially offset by better average selling prices. Programmable Solutions Group decreased 19% to $411 million as gains in cloud were more than offset by lower sales to communications and embedded end-markets. The company stated that its third 10nm facility in Arizona is now fully operational and Intel expects production volumes to be 30% higher than previously forecasted.

Intel expects revenue of $75.3 billion for 2020, up from $75 billion previously. EPS is expected in a range of $4.85 to $4.90, up from $4.85 previously. Therefore, it appears the company is recovering faster than expected from the coronavirus pandemic.

Intel’s key competitive advantage is that it is the largest and most dominate company in its sector. This gives the company size and scale that competitors can’t match. This makes revenues slightly less cyclical today than they were in 2009, but are still dependent on growing demand.

Based on expected EPS of $4.88 for the full year, Intel stock trades for a P/E ratio of 9.3. This is below our fair value estimate of 13. The stock also has a solid 2.9% dividend yield. Total returns are expected to reach 14.6% per year over the next five years.


Top Large Cap #2: Enbridge Inc. (ENB)

Enbridge is an oil & gas company that operates the following segments: Liquids Pipelines, Gas Distributions, Energy Services, Gas Transmission & Midstream, and Green Power & Transmission. Enbridge currently trades with a market capitalization of $63 billion.

Note: As a Canadian stock, a 15% dividend tax will be imposed on US investors investing in the company outside of a retirement account. See our guide on Canadian taxes for US investors here.

Enbridge reported its third-quarter earnings results which showed resilience in the face of an extremely challenging operating environment. Adjusted EBITDA fell 3.6% for the quarter, while distributable cash flow declined just 0.8% year-over-year.

Enbridge has a recession-resistant business model, thanks in large part to its diversified and high-quality sources of cash flow.

Source: Investor Presentation

Enbridge produced extremely consistent cash-flow-per-share growth from 2009 to 2016, reporting positive growth every year, at a compelling growth rate of 10% annually. We expect 5% annual cash flow per share growth for Enbridge over the next five years, due primarily to new projects. Enbridge put more than $10 billion worth of projects into service during the last two years, and more growth projects are under construction.

Enbridge stock trades for a P/E ratio under 9, which is below our fair value estimate of 11. The combination of cash flow growth, the 8.1% dividend yield, and valuation changes results in expected annual returns of 16.8% per year over the next five years.


Top Large Cap #1: ONEOK Inc. (OKE)

ONEOK is an energy company that engages in the gathering and processing of natural gas, as well as a natural gas liquids business and natural gas pipelines (interstate and intrastate). ONEOK also owns storage facilities for natural gas. ONEOK reported its third-quarter earnings results on October 27. The company reported that it generated revenues of $1.85 billion during the quarter, which was 5% less than the revenues that ONEOK generated during the previous year’s quarter.

Despite a revenue decline compared to the prior year’s quarter,which can be explained by commodity price movements, ONEOK managed to remain quite profitable, which can be explained by the fact that its input costs declined as well. During the most recent quarter, ONEOK generated adjusted EBITDA of $750 million, which was up 15% versus the previous year’s quarter, therefore easily outperforming the top line number.

Recovery in its natural gas liquids business has fueled ONEOK’s steady performance over the course of 2020.

Source: Investor Presentation

Distributable cash flows, which is operating cash flow minus maintenance capital expenditures, totaled $540 million during the quarter, up 12% on a year-over-year basis. Distributable cash flows came in at $1.21on a per-share basis.

ONEOK sees 2020’s distributable cash flows declining slightly versus 2019, to ~$1.95 billion, or roughly $4.65 per share. ONEOK forecasts improving results going forward on a sequential basis. Still, DCF-per-share of $4.65 would cover the current annualized dividend payout of $3.74 per share.

A key advantage for ONEOK is that a significant portion of its revenue, especially after the roll-up of its MLP, are fee-based or hedged, which makes the company less sensitive to commodity price swings. This is why ONEOK can operate with considerable leverage without being in dangerous territory, as its cash flows are not very cyclical. The fee-based nature of ONEOK’s revenues and non-cyclical demand for natural gas, e.g. for heating, is what has made ONEOK recession-proof in the past.

Shares of ONEOK trade for a 2020 price-to-earnings ratio near 7. Our fair value estimate is a P/E ratio of 10. In addition, we expect 3% annual DCF-per-share growth, and the stock has a high dividend yield above 12%. Total returns are expected to reach nearly 20% per year over the next five years.

Final Thoughts

With so many various terms, investing can seem overly complex. Market capitalization is a term all stock market investors should understand, and the good news is that it is a fairly simple concept. The market cap of a stock refers to the total value of all its outstanding shares.

Market cap gives investors a better gauge of a company’s size, which can also give clues about its competitive advantages and future growth potential.

Large-caps are generally safer than small-caps, because they are less volatile and tend to have more established business models. Large-caps also have a greater tendency to pay dividends to shareholders. For these reasons, income investors looking to reduce volatility in their stock portfolios should give special consideration to large caps.

In particular, we believe the 10 large cap stocks on this list are leaders in their respective industries, with proven business models and attractive dividends.

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.


More from sure dividend
The Sure Dividend Investing MethodMember's Area