EC 2020 Large Cap Stocks List, Plus Our Top Ten Picks

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.

Large-cap stocks represent businesses with market caps above $10 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.

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.

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: Bank of Nova Scotia (BNS)

  • 5-year expected returns: 14.0%

Bank of Nova Scotia (often called Scotiabank) is the third-largest financial institution in Canada behind the Royal Bank of Canada (RY) and the Toronto-Dominion Bank (TD). Scotiabank has a market capitalization of $52 billion.

Scotiabank reported fiscal Q2 2020 results on 5/26/20. Revenue increased 2% to C$8.0 billion year-over-year, thanks to a 5.3% gain in net interest income, offset by a 2% decline in non-interest income. Net income fell 41% to C$1.3 billion, due to C$1.85 billion in provision for credit losses, which more than doubled from the year-ago period. On an adjusted basis, earnings-per-share fell 39%.

You can see a snapshot of Scotiabank’s capital and liquidity position at quarter-end in the image below:

(Click on image to enlarge)

Source: Investor Presentation

In the core Canadian Banking segment, revenue was flat as 4% growth in net interest income was offset by an 11% decline in non-interest income. Loans and deposits each increased 4% for the quarter, while net interest margin contracted by 7 basis points.

The best-performing segment for the company last quarter was its Global Banking & Markets business, which registered 25% year-over-year net income growth. Strong trading revenue led to 27% revenue growth for the most recent quarter.

Despite slowing economic growth, we believe the bank is capable of growing EPS by 5% annually on average through 2025. The bank’s consistent organic and acquired revenue growth will likely drive the top and bottom lines higher in the long run. Scotiabank has a noticeably differentiated growth strategy when compared to its peers in the Canadian banking industry.

While other banks have focused on expanding into the United States, Scotiabank’s future growth should come primarily from its rapidly-expanding International Banking segment, which provides banking services in emerging economies like Mexico, Peru, Chile, and Colombia.

Bank of Nova Scotia pays an annual dividend of $3.60 in Canadian currency; in U.S. dollars, the annual payout of $2.57 per share yields nearly 6% right now. In addition to EPS growth and the impact of a rising P/E multiple, we expect total annual returns of 14.0% through 2025.

Top Large Cap #9: Enbridge Inc. (ENB)

  • 5-year expected returns: 14.3%

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 $65 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.

An overview of Enbridge’s business model can be viewed in the image below:

(Click on image to enlarge)

Source: Investor Presentation

In the 2020 first quarter, Enbridge reported a GAAP loss of $1.4 billion, compared with a GAAP profit of $1.9 billion in the same quarter last year. The loss was driven by non-recurring charges such as a non-cash impairment of the company’s investment in DCP Midstream of $1.7 billion, and non-cash unrealized derivative fair value losses of $1.9 billion.

Adjusting for non-recurring charges, adjusted earnings-per-share actually increased 2.5% to $0.83 for the 2020 first quarter. Distributable cash flow of $2.7 billion declined fractionally from the same quarter last year. The company also reaffirmed its full-year outlook, expecting distributable cash flow of $4.50 to $4.80 per share. This should keep the company’s current annual dividend of $2.30 per share intact.

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%-6% 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.

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Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of Sure ...

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