Zak Mir on three high yielding blue-chips: Morrisons, Antofagasta and Tesco

Most of us will be familiar with the cliché that a long term investment is a short term one that went wrong. Related to this in my mind is the idea of having bought a stock for the dividend. This usually happens when someone goes long of a stock at the “bottom” and then sees it go down 10%, 20% and more.

Of course, accompanying this process we will see the yield on the shares go up from say 3% to 5% or more. To save face the “investor” can tell their friends that they bought into a company on the basis of the high yield, as income is really important to them! This may sound plausible, but even Warren Buffett does not always say no to the odd quick profit.

Morrisons (MRW)

A good example of this comes with the FTSE 100’s highest yielding stock of the moment – Morrisons (MRW). Presumably, there will be many on the shareholders’ list here who bought the stock above 200p when it was yielding a very healthy 5%.

Morrison’s now yields 7.67%, with the only problem being that the stock is hovering way down at 169p. Presumably, if those caught long and wrong of the troubled group wait long enough the income here will cover the capital loss.

However, there is another point of interest over and above just going long now in order to capture a chunky dividend.

The stock looks to be breaking out of a bullish falling wedge formation, something which suggests there will be a decent rebound. Indeed, while there is no end of day close back below the March wedge floor at 162p we could correctly anticipate a rebound back up to the main resistance region for Morrisons, currently at the former May low of 184p – also the initial July peak, by the end of September.

Antofagasta (ANTO)

With a historical yield of 7.01% Antofagasta (ANTO) is not much further behind Morrisons in the payout stakes. But looking at the daily chart one can say that in the near term we are looking at a more constructive chart position of late, even if Morrisons may snap back more sharply in the end.

The position on the copper miner’s technicals is that the end of the week looked to have served up both a rebound off the floor of a June rising trend channel / 50 day moving average at 796p, as well as a narrow bear trap rebound from just below the initial 796p low.

The chances are now that at least while there is no end of day close back below the 50 day line we could see a retest of the late July resistance through 850p over the course of the rest of August.

Tesco (TSCO)

Next up in the selection of dividend giants is Tesco (TSCO), a company which has seemingly been hit by a flock of black swans over the past couple of years. Even the departure of its former shelf stacking CEO Philip Clarke was not able to revitalise the share price. However, it could be that now the yield of just under 6% will ease the fundamental pain and make the shares feel that much more attractive.

From a technical perspective such an idea currently makes a degree of sense given the initial rebound off the floor of a falling trend channel from December towards 241p. This would imply that at least while there is no end of day close back below the 2013 support line we could see a dead cat bounce over the next couple of weeks towards the 20 day moving average at 268p as a best case scenario.

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