Even though the most asked question for the last year has been when the Federal Reserve will raise interest rates, nobody still has a clue. After the recent Fed meeting commentary was released, some say December and some say March. Some say if the economy weakens they will go to yet another round of quantitative easing. The bottom line is the Fed is so data dependent, and that varies from month to month, that the answer remains the same. No one is quite sure.
One good thing to do in the meantime is buy solid companies that pay good dividends. Even when the Fed does start to raise rates, it will be very small increases and at very measured intervals. We screened the Merrill Lynch research universe database and found five blue-chip companies currently rated Buy or Neutral that have dividends above 4%.
This company is way out of favor and now trades at a level where the dividend is the highest in years. Caterpillar Inc. (NYSE: CAT) is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments — Construction Industries, Resource Industries and Energy & Transportation — and also provides financing and related services through its Financial Products segment.
Any rebound in global growth will benefit this top blue chip stock. Caterpillar is currently trading at the lowest level the shares have traded at since the fall of 2010. Patient investors may make a ton adding this stock to a long-term growth portfolio.
Caterpillar investors receive a 4.3% dividend yield. Merrill Lynch rates the stock at Neutral and has a $69 price target. The Thomson/First Call consensus target price is $70.43. Shares closed higher than both Wednesday at $71.97.
This company posted record North American results, but Wall Street wasn’t that impressed as huge profits didn’t meet estimates. Ford Motor Co. (NYSE: F) has reshaped the company’s product line in recent years, and sales have been outstanding. With sales booming not only in the United States but in China, and six new models being introduced in Russia, the company is expanding market share, while maintaining a competitive pricing structure. Merrill Lynch thinks that 2016 will be a banner year for the iconic automobile and truck manufacturer.
The F-150 truck remains the top-selling truck in America and has been the top-selling U.S. vehicle for the past 33 years, despite strong challenges from the competition. While consumers have bought vehicles in a big way in recent years, replacement continues as low interest rates, dealer incentives and increasing take home pay make a vehicle purchase an easy choice.
Ford investors are paid a very solid 4.01% dividend. The Merrill Lynch price target is $17. The consensus target is $17.76. The stock closed most recently at $14.97.