With the earnings flood in full effect right now, and April having the possibility of being the worst month for the markets since January of 2016, many investors are searching for growth ideas that have some semblance of value. With yields dropping, and forecasts for interest rate hikes being cut, the best place for investment dollars remains the stock market, though it is very pricey.
With the market still very elevated, we wanted to find top growth stocks that are not trading at nosebleed levels that also pay investors solid dividends. We screened the Merrill Lynch US 1 list, which is a portfolio of the highest conviction stocks at the firm, for stocks not trading at 52 week highs that also pay reasonable and reliable dividends. We found four that more conservative growth and income accounts could feel good buying now.
This company has had a nice run off lows posted in November but is still trading below levels printed last summer. 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 14.4 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.
The company posted fourth-quarter adjusted earnings per share in line with analyst expectations, though its revenue fell short of Thomson Reuters consensus estimates and also was a slight drop from sales during the year-earlier quarter. The first-quarter results are expected April 25.
AT&T investors receive a 4.87% dividend. The Merrill Lynch price objective for the stock is $46, and the Wall Street consensus target price is $42.80. Shares closed Thursday at $40.36.
Delta Air Lines
This company consistently has ranked highly with Wall Street. Delta Air Lines Inc. (NYSE: DAL) and the regional Delta Connection carriers offer service to 334 destinations in 64 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft.
Wall Street analysts have long lauded Delta for the most extensive hedging policy among the airlines and it owns and operates a refinery in addition to a sizable hedging book. The stock underperformed last year, and if bookings and the economy continue to spike up in 2017, many believe that the company’s multiple stands to benefit the most among the major carriers.
The airline reported earnings that exceeded the consensus estimate Thomson Reuters. Delta also said that though its closely followed metric of passenger unit revenue fell year on year, it should rise 1% to 3% in the current quarter.
Delta investors receive a 1.76% dividend. Merrill Lynch has a $64 price objective. The consensus price target is $61.43, and shares closed most recently at $45.93.
This top mid/large cap energy pick is down a stunning 30% this year and actually could be a takeover target. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, natural gas liquids, and natural gas. It primarily operates in the United States, Denmark, Equatorial Guinea, Norway, Malaysia and the Joint Development Area of Malaysia/Thailand.
Merrill Lynch cites the big short interest in the stock, which Wall Street Journal now pegs at 30.64 million shares or 10.9% of the float. The firm also points to the 60 million barrels of oil equivalent per day growth in the second half of 2017, which should drive free cash flow from 2018.
Shareholders receive a 2.13% dividend. The whopping $80 Merrill Lynch price target compares with the consensus target of $63.13. Shares closed Thursday at $46.89.
This is a top consumer goods stock, and given the big sell-off in the shares since last August, it may be offering investors an outstanding value at current levels. Newell Brands Inc. (NYSE: NWL) is a manufacturer and marketer of consumer products has six reporting segments, including the recently acquired Jarden.
The segments are: Writing (Sharpie, Paper Mate, Waterman, Parker), Home Solutions (Rubbermaid, Calphalon, Goody), Tools (Irwin, Lenox), Commercial Products (Rubbermaid Commercial Products, Rubbermaid Healthcare), Baby & Parenting (Graco, Aprica) and Jarden (with 120 brands including Yankee Candle, Jostens, Oster, Sunbeam, Mr. Coffee, K2, Marmot, Rawlings, Coleman and First Alert).
The stock is down around 15% from its mid-August highs, and Merrill Lynch believes value triggers remain underappreciated, with a likely sales acceleration possible. Top Wall Street analysts see upside from cost synergies, more acquisitions and portfolio rationalization that could drive operating margins and the multiple. The company is expected to report first-quarter results in early May.
Investors receive a 1.62% dividend. The Merrill Lynch price target is $55. The consensus price objective is higher at $57.29. Shares closed Thursday at $46.89.
These four top ideas from the analysts at Merrill Lynch are all trading well below 52-week highs. These solid stocks offers investors outstanding upside potential and solid dividends while they wait for a move in the shares higher.