Jefferies sees upside ahead for these stocks — and they pay solid dividends

Jefferies highlights Lamb Weston (LW), Virtu Financial (VIRT), and STAG Industrial (STAG) as buy-rated, domestically-oriented stocks with upside potential following earnings beats and solid guidance. Lamb Weston, despite a 20% year-to-date decline, has a 41% upside to Jefferies' target and a 2.78% dividend yield, driven by strategic value creation initiatives. Virtu Financial, up over 15% this year, boasts a 14% upside and a 2.33% dividend yield, benefiting from elevated volatility and increased retail participation. STAG Industrial, a REIT with a 4.21% dividend yield, has a 29% upside, supported by strong leasing spreads and demand from onshoring trends.

Analysis

Jefferies advocates for domestically-oriented equities, citing attractive valuations on both absolute and relative terms compared to foreign-exposed names, despite the current outperformance of international markets as evidenced by the iShares MSCI All Country World Index ex U.S. ETF (ACWX) gaining approximately 14% in 2025 versus a fractional rise in the S&P 500. This preference is supported by potential macroeconomic tailwinds such as falling oil prices and an anticipated extended period of dollar weakness. Within this framework, Jefferies highlights three mid-cap, dividend-paying stocks that recently beat earnings expectations and provided solid guidance. Lamb Weston (LW), a frozen potato products manufacturer, reported fiscal third-quarter adjusted EPS of $1.10 (versus $0.86 consensus) and revenue of $1.52 billion (versus $1.49 billion consensus), reiterating its full-year guidance; despite a 20% year-to-date stock decline, Jefferies sees 41% upside to its $75 price target, with a 2.78% dividend yield, noting activist involvement and strategic review for value creation. Virtu Financial (VIRT), a high-frequency trading firm, reported Q1 normalized adjusted EPS of $1.30 (topping $1.20 consensus), leading Jefferies to raise its 2025 and 2026 EPS estimates to $4.10 and $4.05 respectively; the stock, up over 15% year-to-date, has a 14% upside to Jefferies' $47 target and a 2.33% dividend yield, benefiting from market volatility, retail participation, and growth in diverse asset classes. STAG Industrial (STAG), a U.S. industrial REIT, reported Q1 core funds from operations of 61 cents per share (1 cent above consensus) and revenue of $205.6 million (beating $201.1 million consensus), with cash-leasing spreads jumping 27.3%; Jefferies projects 29% upside to its $45 price target for the stock, which is up nearly 5% year-to-date and offers a 4.21% dividend yield, citing positive leasing spread trends driven by onshoring and supply chain reconfiguration.

Key Decisions for Investors

• Investors should consider Jefferies' thesis favoring U.S. domestically-oriented mid-cap stocks, particularly those that have demonstrated strong earnings, issued positive guidance, and offer dividend income.
• Lamb Weston (LW) presents a potential value opportunity; monitor progress on its strategic review and operational improvements given the activist involvement and Jefferies' 41% upside target, balanced against its recent stock decline and acknowledged headwinds.
• Virtu Financial (VIRT) could be a tactical allocation to benefit from continued market volatility and growth in retail trading, supported by Jefferies' increased earnings estimates, but investors should be mindful of the cyclical nature of its earnings drivers and the sustainability of current activity levels.
• STAG Industrial (STAG) offers a compelling combination of income via its 4.21% dividend yield and growth potential from strong U.S. industrial real estate fundamentals, particularly onshoring trends, making it a candidate for investors seeking exposure to this theme.