Investing

Merrill Lynch Has 4 Safe Dividend Stocks to Buy as Market Searches for Bottom

General Motors

Despite all the recall troubles and litigation issues, hedge funds and mutual funds are continuing to stick with General Motors Co. (NYSE: GM), as many view the stock as very undervalued. GM trades just below an incredible 5.4 times estimated 2016 earnings. GM, like Ford, has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago and grabbed a big chunk of what is now the world’s largest auto market.

With the company facing continued possible punitive damages over ignition switches, there will continue to be a headline risk cloud over the stock. Long-term patient investors that can look beyond current issues may stand to make outstanding money on the auto giant, especially as oil prices plummet and low gasoline prices continue to push new buyers into showrooms.

GM investors receive a 4.89% dividend. The $44 Merrill Lynch price target is higher than the consensus target of $41.59. Shares closed Wednesday at $29.42.

PPL

This utility beat third-quarter earnings expectations but came in just a little light on the revenue side. PPL Corp. (NYSE: PPL) serves 321,000 natural gas and 397,000 electric customers in Louisville and 16 surrounding counties, as well as 543,000 customers in 77 Kentucky counties and five counties in Virginia. The company also provides electric delivery services to approximately 1.4 million customers in Pennsylvania and operates electricity distribution network for the Midlands, South West, and Wales in the United Kingdom.

In addition, PPL offers a range of customer-care and back-office services to competitive retail energy suppliers, including customer enrollments; contract management; electronic data exchange; simple and complex billing; and call center operations comprising telemarketing, payment processing and collections of overdue accounts.

The company is one of the leading utility companies in the United States that plans to continue to increase regulated operations and lower earnings volatility attached to competitive operations. PPL raised cash and lowered debt late last year by selling some hydroelectric assets to Northwestern energy.

Investors receive a generous 4.6% dividend. The Merrill Lynch price target is $36. The consensus target is $36.38, and PPL closed Wednesday at $32.80.


While this kind of sell-off is always a punch in the face to investors, the overall future doesn’t look near as grim as the current one. Low gasoline prices will spur spending, and while the pundits are screaming recession, the possibility still looks only 50/50 at best. One thing is for sure, the Federal Reserve may not raise rates again until 2017, and that will also help with economic tailwinds.

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