Looking to diversify your income portfolio? These three stocks all pay a significant yield – but they’re not just income plays. These companies are all turnaround stories, undervalued according to Morningstar equity analysts. Mattel – once an industry leader – lost out to modern rivals, Wynn Resorts has been hit by the slowdown in China and management at AllianceBernstein still needs to make some tough decisions for the stock to be a success.
With four or five star Morningstar ratings, analysts believe these stocks will rally however to reach fair value. And if you are looking to add US income stocks to your portfolio – and can stomach volatility – these might be worth considering.
Mattel (MAT)
Yield: 6.17%
Mattel's turnaround remains a work in process, as the long-time industry leader has underperformed its peers in recent periods despite its long-lived and well-regarded portfolio of brands that include Barbie, Hot Wheels, Fisher-Price, and American Girl.
With a mature domestic toy market and foreign exchange headwinds, top-line growth has been difficult to achieve, despite opportunities in underpentrated emerging markets.
A careful acquisition strategy, the capture of new licenses, and the revival of toy box brands could help restore Mattel's sales growth rate. Mattel will have to become more nimble, innovating faster while still focusing on operational excellence in order to restore net income growth.
Wynn Resorts (WYNN)
Yield: 5.72%
Morningstar equity analysts view gaming giant Wynn Resorts as a well-established high-end iconic brand that is positioned to participate in the attractive long-term growth opportunity of Macau, as the company expands its room share to 9% from 6% through the Cotai Palace opening in 2016.
It is not unreasonable to expect Macau visitation and revenue to reaccelerate to above a mid-single-digit pace in a few years, as new casinos open, infrastructure is built out in 2017 and beyond, and nearby Hengqin Island – which is three times the size of Macau is developed over the next decade. This increased supply should easily be matched with demand, as the population within a few hours of Macau is seven times that of Las Vegas, yet the number of Macau rooms and visitors were only one-fifth and three-fourths that of Las Vegas in 2014.
AllianceBernstein (AB)
Yield: 7.45%
Analysts continue to believe that the key to a sustained turnaround at AllianceBernstein hinges on the firm's ability to get its value and growth equity platforms on track. While they've been impressed by the changes so far, such as tearing down the walls between the Alliance and Bernstein sides of the business, improving the firm's ability to launch new and enhanced products, and expanding the base of business AB receives from retail investors and fixed-income products, the net result has been a company that has basically held the reins tightly the past six and a half years.
Total assets under management has hovered between $400 billion and $500 billion since the equity markets bottomed in March 2009 and only recently looked like it was capable of moving beyond the top end of that range.
With AB generating some of its best active equity performance in years, analysts think it was set up for a return to positive equity flows in the near to medium term, especially with investors showing a willingness to kick the tires on actively managed equity funds with records of solid performance.
