While interest rates have jumped dramatically recently, much of it has to do with market anticipation on what most experts feel will be a December rate hike by the Federal Reserve of one-quarter of a percentage point, or 25 basis points. In addition, most people on Wall Street feel the Fed will raise rates twice in 2017 and 2018. If the increases are the same that would put the fed funds rate at about 1.75% by 2019. Still historically way below normal.
For those looking to generate income, equities remain one of the best resources, and the fact that you can write covered calls on stock you own can also contribute. In fact, at most Wall Street firms, for retail accounts covered, call writing is the only options strategy that is approved.
We screened the Merrill Lynch research universe for stocks that pay a dividend in line with the current 10-year U.S. Treasury bond, had Merrill Lynch’s best volatility rating and were rated Buy. We found five that look like long-term winners.
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 is in the Merrill Lynch US 1 portfolio and has several major catalysts likely to 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 expected to be coming next month.
AT&T investors receive a 5.04% dividend. The Merrill Lynch price objective is $46. The Wall Street consensus price target is $40.76. Shares closed Thursday at $38.88.
This company remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, it is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.
The company reported third-quarter earnings that beat analysts’ estimates but blamed strong international headwinds and political uncertainty for lower revenue. Though net sales in the quarter fell 7% from a year earlier, they were higher than Wall Street estimate, helped by higher prices for sodas and a strong demand for water and sports drinks in North America. This did make seven-straight quarters that earnings surpassed Wall Street’s expectations.
It’s important to remember though that the company own 31.5% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola investors receive a 3.5% dividend. Merrill Lynch has a $50 price target, while the consensus target is $46.72. The stock closed Thursday at $40.17.