Merrill Lynch Has 6 Big Dividend Stocks to Buy for 2018

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It’s absolutely no secret that interest rates will continue higher in 2018, and investors can expect at least three rate hikes of 25 basis points or one-quarter of 1%, and maybe even four if the economy continues to grow. Despite this baked-in knowledge, Treasury bill and bond rates continue to hover at generational lows. Does the bond market know something we don’t? Perhaps, but one thing is for sure, dividend paying stocks will still be a great bet for investors in 2018.

We screened the Merrill Lynch research database looking for stocks that were dividend paying, and had a Buy rating. We found six that look like great picks for investors concerned with a pricey market and looking for total return.

Altria

The maker of tobacco products and wine has posted very solid numbers throughout the year, and the fourth quarter is looking good as well. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world.

Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate. Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb along with strong share repurchase activity. The board also raised the dividend by 8.2% in 2017.

To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller, which together generated nearly 10% of its pre-excise tax revenue last quarter.

Altria investors receive a 3.64% dividend. The Merrill Lynch price target for the shares is $78, and the Wall Street consensus estimate is $72.92. The stock traded early Thursday at $71.75.

Exxon

This stock remains a top Wall Street energy pick though it is still down over 10% in 2017. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

For 75 years in a row, Exxon has raised its dividend on a split-adjusted basis. Thanks to the company’s vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.

Shareholders receive a 3.67% dividend. Merrill Lynch has a $90 price objective, while the consensus target is $86.50. The stock traded at $84.00 Thursday morning.

Coca-Cola

This top Warren Buffet holding not only offers safety but an incredible strong worldwide brand with 40% overseas sales. 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, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one 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 Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Investors receive a 3.22% dividend. The $52 Merrill Lynch price target compares with a $49.06 consensus target. The stock was last seen at $45.95 a share.