Despite the constant threat of interest rate hikes, yields continue to hover at the same levels they were at right after the election. People continue to buy the Treasury market for numerous reasons, not the least of which is they are concerned about the potential near-term volatility and looking for the proverbial safe place to hide. This kind of concern can lead to great bargains for income investors with higher risk tolerance.
With many investors looking for income-producing stocks, we decided to look at the Merrill Lynch research universe for stocks, including master limited partnerships (MLPs), that yield 8% or better and are rated Buy. We found four that are doing extremely well and make sense for total return accounts to consider.
This is the largest of the rural local exchange carriers and is expected to continue get a large dose of government money to provide continuing internet service in rural areas. CenturyLink Inc. (NYSE: CTL) is a global communications, hosting, cloud and IT services company enabling millions of customers to transform their businesses through innovative technology solutions.
CenturyLink offers network and data systems management, Big Data analytics and IT consulting, and it operates more than 55 data centers in North America, Europe and Asia. The company provides broadband, voice, video, data and managed services over a robust 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network.
The company announced last month plans to sell its data centers and colocation business to a consortium led by BC Partners for $2.3 billion, which it will use in part to fund its planned tie-up with Level 3 Communications. Under the terms of the agreement, CenturyLink also will receive a $150 million minority stake in the consortium’s new global secure infrastructure company. With the deal almost complete and the arbitrage accounts starting to move on, now may be a good time to buy shares.
CenturyLink investors receive a gigantic 8.85 % dividend. Merrill Lynch has a stunning $42 price target, while the Wall Street consensus price objective is $28.08. The stock closed trading on Thursday at $24.42.
This top MLP just recently declared its 14th consecutive quarterly distribution increase. CrossAmerica Partners L.P. (NYSE: CAPL) is primarily involved in the wholesale distribution of motor fuel, owner and lessor of real estate and retail distribution of motor fuels. The company distributes motor fuel to 1,100 locations and owns or leases more than 625 sites primarily in the Northeast.
In August 2016, Alimentation Couche-Tard announced acquisition of CrossAmerica’s general partner, CST Brands. The transaction is expected to close very soon and could prove to be a large catalyst for the shares.
Investors in CrossAmerica Partners are paid a strong 9.23% distribution. Merrill Lynch has a $28 price target for the stock, which is nearly in line with the posted consensus target of $28.89. The stock closed most recently at $26.54 a share.