10 Stocks Have Made Up All the S&P 500 Gains: 5 Dividend Picks to Grab Now

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One of the constant themes that bearish strategists focus on after an eight-year bull market on the S&P 500 is valuation. While higher than the long-term average, it’s important to note that just 10 stocks have made up all the gains in the S&P 500 so far in 2017, which means the other 490 are essentially flat.

Two graphs from research firm Bespoke point out that 70% of companies beat earnings expectations for the first quarter of 2017. That’s the highest number since the first quarter of 2006. In addition more companies are raising guidance than lowering guidance.

Given that so many good stocks did beat estimates, and raised guidance, we screened the Merrill Lynch research universe for dividend-paying stocks that beat estimates. We found five that look outstanding now.

AIG

After a nice rally last year, this top financial and insurance company is down 10% this year. American International Group Inc. (NYSE: AIG) provides insurance products for commercial, institutional and individual customers, primarily in the United States, Europe and Japan.

Its Commercial Insurance segment offers general liability, environmental, commercial automobile liability, workers compensation, excess casualty and crisis management insurance products, as well as various risk-sharing and other customized structured programs; commercial, industrial and energy-related property insurance; aerospace, political risk, trade credit, surety and marine insurance; and various insurance products for small and medium-sized enterprises.

The company reported stellar first-quarter results. The analysts noted in their research report:

The first quarter earnings-per-share beat came from lower than expected level of catastrophe losses and higher than expected alternative investment income. We have trimmed our investment income and premium forecast resulting in a reduction to our 2018 and 2019 estimates.

Shareholders are paid a 2.03% dividend. The Merrill Lynch price target for the stock of $68 is in line with the Wall Street consensus target of $68.29. Shares closed up nicely on Thursday at $62.67.

American Express

This stock has had a solid year and is on the Merrill Lynch US 1 list, but is still down almost 20% from highs printed in 2014. American Express Co (NYSE: AXP) provides charge and credit payment card products and travel-related services to consumers and businesses worldwide.

The company’s products and services include charge and credit card products; payments and expense management products and services; consumer and business travel services; stored value products, such as traveler’s checks and other prepaid products; and network services.

The Merrill Lynch team noted this in their report on earnings:

Strong first quarter delivers a beat and “almost” raise as the company reports first quarter earnings-per-share of $1.34, compared to the Street at $1.27. Better than expected billings, healthy revenue growth and in-line expenses drove the Q1 surprise. The first quarter results should remove some of the investor anxiety that the intense competitive backdrop would erode the American Express franchise.

Amex shareholders are paid a 1.62% dividend. The $94 Merrill Lynch price target is well above the consensus target of $83.19. The stock closed most recently at $78.33.