This time last year the market was in trouble, having the first down year in some time. One spin around the sun and we are in much better shape as the fourth quarter for 2016 begins. One thing is for sure though, stocks on a relative basis are more expensive, and the volatility is starting to creep higher as worries over a December rates increase and a tight presidential election have investors nervous.
One smart thing for growth stock buyers is to focus on total return and buy large cap quality stocks that will do well regardless of the near-term economic news. We screened the Merrill Lynch US 1 stock list, which is the firm’s highest conviction stock ideas, for companies with solid growth prospects that also pay dividends. These four look very solid now.
This company has had an incredible run this year but is off over 10% in less than six weeks. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.
With its shares trading at a very cheap 14.3 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
AT&T has several major catalysts that likely will drive strong network traffic demand: DirecTV Now and Mobile, “Data-Free TV” for DirecTV/U-verse subscribers and increasing penetration of unlimited data plans. Many on Wall Street believe that the company is well-positioned to address ongoing traffic requirements, with additional LTE capacity available and the ability to leverage small cell deployments.
Other top Wall Street analysts have cited the company’s positive commentary on free cash flow, and improving video/broadband trends later this year with single truck-roll and new converged offerings are expected to be coming next month.
AT&T investors receive a 4.9% dividend. The Merrill Lynch price target for the stock is $46, and the Wall Street consensus price objective is $42.83. Shares closed Wednesday at $39.16.
Coca-Cola European Partners
The former Coca-Cola Enterprises reported solid earnings and recently completed a big merger. Coca-Cola European Partners PLC (NYSE: CCE) is the leading Western European marketer, producer and distributor of nonalcoholic ready-to-drink beverages and one of the world’s largest independent Coca-Cola bottlers.
The company is the sole licensed bottler for products of Coca-Cola in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway and Sweden. It operates with a local focus and has 17 manufacturing sites across Europe, where the company manufactures nearly 90% of its products in the markets in which they are consumed.
The company reported solid first-quarter earnings, though volumes dropped some. The recent merger with Coca-Cola Erfrischungsgetränke in Germany and Coca-Cola Iberian Partners, which serves Spain and Portugal, was a big catalyst. Shareholders approved the merger, and the S&P 500 removed the stock from the index as a result of the merger. The stock was crushed as index funds were forced to sell, giving investors an outstanding entry point.
Coca-Cola European Partners investors receive a 1.9% dividend. The Merrill Lynch price target is set at $44.50. The consensus target is higher at $44.83. The shares closed on Wednesday at $39.01.