4 Merrill Lynch High Quality and Dividend Yield Stocks to Buy Now

The higher the market goes, and the more that volatility starts to play a part of the action, the more conservative investors want to move out of any high beta stocks. With a potential for a large market correction always looming, the time to do some portfolio due diligence is now. A new research report from Merrill Lynch acknowledges that many investors prefer a consistent strategy that focuses on higher-quality investments. The firm’s High Quality and Dividend Yield stocks are just the ticket for more conservative stock investors.

While the High Quality and Dividend Yield stocks have underperformed the overall market so far this year, they tend outperform during times of market duress. Since the portfolio’s inception in 2004, it has out outperformed the S&P 500 total return index. With a long running bull getting tired, and the market very pricey, these stocks make good sense to rotate to now.

We picked four with among the highest dividend yields and upside potential. All are rated Buy at Merrill Lynch.

Automatic Data Processing

This conservative information technology company that makes the list. Automatic Data Processing Inc. (NASDAQ: ADP) is one of the world’s largest providers of business outsourcing and human capital management solutions. ADP offers a wide range of human resource, payroll, talent management, and tax and benefits administration solutions from a single source, and it helps clients comply with regulatory and legislative changes, such as the Affordable Care Act.

The company posed very solid fiscal third-quarter earnings that beat consensus estimates, and the guidance for the balance of fiscal year 2015 was raised to the high end. With the economy poised to strengthen, this is a solid stock to buy.

ADP investors are paid a 2.35% dividend. The Merrill Lynch price target is $95. The Thomson/First Call consensus price target is much lower at $85.13. The stock closed Friday at $83.85.

ALSO READ: Merrill Lynch’s 4 Stocks to Buy That Are Breaking Out

This top industrial could really jump with an economic pickup, and it is also a member of the Merrill Lynch US1 list. 3M Co. (NYSE: MMM) is closely correlated to U.S. leading economic indicators. The more the indicators continue to improve, the higher the likelihood of strong earnings performance for the company the rest of the year, and with a huge portfolio of products in multiple silos, 3M certainly has staying power

One issue for the industrial giant is that the company has a higher than sector average share of earnings from overseas, so any continued rally of the U.S. dollar against other currencies could lead to a decline in Wall Street earnings estimates and the guidance. With that said, any pickup here domestically could help to offset currency headwinds.

3M investors are paid a 2.6% dividend. The Merrill Lynch price target is a strong $190, and the consensus target is $168.38. The stock closed Friday at $158.04 per share.


This top technology stock has totally underperformed this year. Qualcomm Inc. (NASDAQ: QCOM) lowered its full-year earnings and revenue forecasts to start off the year, as it lowered the sales outlook for its semiconductor business. Not what analysts were expecting. Yet the stock is a Wall Street favorite, and many are sticking to their guns, basically saying that trading at current levels, the stock is at 14.81 times estimated 2015 earnings, it is a tremendous long-term value. Qualcomm is a quality tech company with recurring royalty revenue and a strong footprint, so patient investors may fare very well.

ALSO READ: Which Stocks Will Take the Brunt of the Next Big Hit to the Dow?

The company is reported to be losing chip business, and activist investor Jana Partners is said to be pressuring the company to spin off its chip business. Jana also wants Qualcomm to cut costs, accelerate a share buyback, improve disclosures and refresh its board. Jana is listed as one of the company’s largest shareholders, with a reported $2 billion stake.

Qualcomm investors are paid a 2.86% dividend. Merrill Lynch has a very big $80 price target for the stock, and the consensus estimate is lower at $74.78. Shares closed Friday at $67.03.

United Technologies

This is another diversified company with large government contract exposure. United Technologies Corp. (NYSE: UTX) provides high-technology products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems, Pratt & Whitney and Sikorsky. Since peaking in late February, the stock has rolled over and not acted well. Many Wall Street analysts believe the company is strategically positioned to benefit from two megatrends in the long-term: urbanization and commercial aerospace.

The company just announced that it is finalizing plans to sell its Sikorsky Helicopters unit. From United Technologies perspective, divesting Sikorsky makes a lot of sense, as they are primarily an aircraft engines, systems and components maker with a strong push towards commercial aviation segments, particularly the aftermarket, while Sikorsky is a platform prime contractor whose core strength is in military markets. Many have thought that spinning off the company also makes sense for shareholders.

United Technologies shareholders are paid a solid 2.2% dividend. The Merrill Lynch price target is $140, and the consensus target is lower at $133.56. Shares closed Friday at $117.60.

ALSO READ: 6 Analyst Stocks With 50% to 100% Upside Calls

These stocks are perfect for more conservative growth investors. They all pay solid dividends and offer solid upside from current trading levels. They also will not be destroyed in a market correction, which is probably overdue.

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