Even though the Federal Reserve most likely raises the federal funds rate in December, the increase probably will be a whopping 25 basis points or one-quarter of 1%. In fact, most interest rate strategists on Wall Street feel that by the end of 2017, the fed funds rate likely will be only 2%. That’s a figure that is way below the average rate of the past 30 years.
We screened the Merrill Lynch data base for stocks that not only were rated Buy at the firm, but had the safest volatility risk rating. We found four companies that not only met our criteria, but have faded somewhat during the recent market sell-off and are offering even better valuation and entry points for investors.
This company posted very solid third-quarter numbers, and many on Wall Street think the fourth quarter will be good as well. AT&T Inc. (NYSE: T) is clearly one of the most ignored dividend plays on Wall Street. In fact, AT&T continues to be one of the most under-owned securities by active fund managers. Trading at a very cheap 12.07 times estimated 2016 earnings, AT&T continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans, an area that many on Wall Street believe could lead to some earnings weakness.
Along with outstanding third-quarter results, AT&T reiterated 2015 guidance for double-digit revenue growth and continued consolidated margin expansion. Management expects capital spending to increase sequentially and also estimate that free cash flow could be better than $4.5 billion. Third-quarter wireless subscriber additions came in higher than many Wall Street estimates, and DirecTV saw positive video additions where many expected losses.
AT&T investors receive an outstanding 5.75% dividend. The Merrill Lynch price target for the stock is $40, and the Thomson/First Call consensus target is $36.96. Shares closed Thursday at $32.69.