Merrill Lynch Makes a Huge Change to Prestigious US 1 Portfolio

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With earnings for the third quarter on deck, and the fourth quarter of 2016 almost underway, many of the top companies we follow on Wall Street are making some changes to the lists of their high conviction stock picks for clients. With the market bursting through to new all-time highs, it makes sense to examine the lists and make some changes as the rest of the year could have additional volatility as the political cycle could prove to be very volatile component.

In a recent research note, the analysts at Merrill Lynch make a big move by adding NextEra Energy Inc. (NYSE: NEE), a top utility company, to the firm’s well-respected US 1 list of stocks to Buy. We cover this new addition, as well as the company it replaced. We also screened the list for the highest dividend-paying stocks in the group.

Merrill Lynch cites the very strong balance sheet and NextEra Energy. It is a leading clean energy company with consolidated revenues of over $17.0 billion and approximately 44,900 megawatts of generating capacity, which includes megawatts associated with noncontrolling interests related to NextEra Energy Partners.

Headquartered in Juno Beach, Florida, NextEra Energy’s principal subsidiaries are Florida Power & Light Company, which serves approximately 4.8 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the United States, and NextEra Energy Resources, which, together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun.

Top analysts feel the company may very well be one of the top total return plays out of the large cap regulated space in the sector. One of the key drivers of NextEra’s growth has been the renewable energy development program, which continues to expand as the company adds new projects to its backlog. Those projects are expected to help grow 6% to 8% compound annual growth in adjusted earnings per share through 2018. Most on Wall Street feel that the steady earnings growth should also provide consistent dividend growth over that same time frame.

Shareholders receive a 2.74% dividend. The Merrill Lynch price target is $149, and the Wall Street consensus target is $133.94. The stock closed Tuesday at $126.79.

Jack in the Box Inc. (NASDAQ: JACK) was removed from the US 1 list, but it remains rated a Buy at Merrill Lynch. It looks as though the removal is more of a valuation call. The stock sold off last year has been on a tear since March, and the entry point here still looks very solid.

The company operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Eats, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada.

Shareholders receive a 1.22% dividend. The Merrill Lynch price target is $108. The consensus target is $108.23. Shares closed most recently at $98.24.

The following are the three highest dividend yielding stock in the Merrill Lynch US 1 portfolio.