It has been years since we have witnessed the kind of market we are in now. After this run finally peters out, it may be years again before we see another one. Incredibly low volatility, a lack of 10% or even 5% declines, and a basic investor malaise that comes with eight years of rising equity prices with virtually zero volatility. Toss in declining yields and a flattening yield curve, and there is indeed ample reason for investors’ concern.
So what do investors do now? Cash isn’t the answer, especially for those in search of income, and jumping into expensive technology stocks like the FANG stocks is only for investors with a very high risk tolerance. The answer may be the Merrill Lynch High Quality and Dividend Yield stocks, a portfolio the firm has run since 2004. The screen seeks to identify high-quality stocks with secure and above-market dividend yields that are aligned with the firm’s analysts’ fundamental outlook.
We found five stocks on the list that are rated Buy and make sense for nervous investors who want to stay in the market but are concerned we may see a pullback.
This is a top stock that has been trading sideways and may be offering an excellent entry point. CVS Health Corp. (NYSE: CVS) provides integrated pharmacy health care services. Its Pharmacy Services segment offers pharmacy benefit management solutions, such as plan design and administration, formulary management.
The Retail/LTC segment sells prescription drugs, over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, seasonal merchandise and greeting cards, as well as provides photo finishing services. It operates 9,655 retail stores in 49 states, the District of Columbia, Puerto Rico and Brazil, primarily under the CVS Pharmacy, CVS, Longs Drugs, Navarro Discount Pharmacy and Drogaria Onofre names. It also operates online retail pharmacy websites and 32 on-site pharmacy stores, long-term care pharmacy operations and retail health care clinics.
Some think that Warren Buffett may have his eye on the company, which surely will receive more interest now with the Walgreens/Rite-Aid deal falling apart.
CVS investors receive a 2.46% dividend. The Merrill Lynch price target for the stock is $90, and the Wall Street consensus target is $87.95. The shares closed Wednesday at $81.25.
This top industrial could really jump with an economic pickup, and only 19% of mutual funds currently hold the stock. 3M Co. (NYSE: MMM) is a diversified, global manufacturer. Its businesses are technology-driven and organized under five segments: Consumer, Safety and Graphics, Electronics and Energy, Healthcare, and Industrial. Its popular brands include Scotch, Post-It, 3M and Thinsulate. The company also holds over 500 U.S. patents.
The company recently entered into a definitive agreement with Johnson Controls to acquire the latter’s operating unit Scott Safety. The deal, worth $2.0 billion, is expected to close in the second half of 2017. The acquisition will likely boost 3M’s technology, manufacturing, global capabilities and brand. In addition, it will enable the company to expand its recent portfolio actions within the Safety and Graphics business to help position for long-term success.
Shareholders are paid a 2.23% dividend. Merrill Lynch has a $225 price target, and the consensus target is $198.46. The stock closed Wednesday at $210.62.