The only redeeming quality to a big market sell-off is the opportunity that it presents to investors holding some dry powder who have the ability to buy stocks on sale. The recent sell-off is the largest in some time and offers growth and income investors an incredible opportunity to buy high-yielding blue chips at bargain prices.
We screened the Merrill Lynch universe for high-yielding blue chips that are on sale and came up with five top companies that have yields higher than 4%, and all are rated Buy at Merrill Lynch.
This company posted solid second-quarter numbers recently. AT&T Inc. (NYSE: T) has to be one of the most ignored dividend plays on Wall Street. In fact, AT&T is the third most underweighted security, and the most under-owned by active fund managers, according to Merrill Lynch. While growth has been admittedly slower over the past few years, the company continues to expand its user base, and strong product introductions from smartphone vendors has not only driven traffic, but increased device financing plans. That is an area that many on Wall Street believe could lead to some earnings weakness.
Many on Wall Street think that finally closing the DirecTV deal will remove a lot of lingering questions, especially where the company’s big dividend is concerned. It’s a good bet that the synergies created by the deal are being underestimated by Wall Street, and many analysts see upside to wireless margins, which were a positive earnings driver in the second quarter.
AT&T investors are paid an outstanding 5.87% dividend. The Merrill Lynch price target for the stock is $40, and the Thomson/First Call consensus price target is $37. Shares were trading Tuesday at $31.99.
The maker of tobacco products and wine has posted very solid numbers through the first half of the year, and third 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 its 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, and strong share repurchase activity.
Altria investors are paid an outstanding 4.1% dividend. Merrill Lynch has a $59 price target. The consensus target is $59.50. The stock was trading on Tuesday at $54.71.