Needless to say, the stock market can be a very cruel mistress. Companies can report great numbers, but if the guidance is light? Look out! So what are patient long-term investors to do? The bottom line is stay with strong companies paying big dividends. If you do have to wait for fundamentals to resurface and come around, at least you have the comfort of consistent dividends coming in to help weather any temporary storm.
We screened the Merrill Lynch research data base for stocks yielding at least 4% that are currently out of favor and are rated Buy at the firm. We found four that make good sense for investors now and in the future.
Enterprise Products Partners
This is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) once again, despite the energy slump, recently raised the distribution 1%. The company maintains a very good long-term position in the market. It provides many of its services on the basis of long-term, fixed-fee contracts, insulating against some of the wilder swings of the commodities that it trades in.
One reason why many analysts may have a liking for the stock might be its distribution coverage ratio. The company’s distribution coverage ratio is well above 1x, making it relatively less risky among the master limited partnerships (MLPs). The company’s distributions have grown for several quarters and are expected to continue in 2016. Plus the Standard & Poor’s current rating is BBB+, which is investment grade and the outlook is stable.
Enterprise Products investors receive a 6.54% distribution. The Merrill Lynch price target for the stock is $35. The Thomson/First Call consensus target is $32.88. Shares closed Thursday at $23.84.
This stock could be offering investors the best value at current trading levels. Pfizer Inc. (NYSE: PFE) rocked Wall Street last year by announcing a gigantic $15.2 billion purchase of Hospira, a top provider of sterile injectable drugs — including those used for acute care and cancer treatment — infusion technologies and biosimilars, which are subsequent versions of drugs whose patents have expired.
With a strong pipeline and the fact that Pfizer is the world’s largest drug manufacturer by sales volume, many analysts feel the company can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years, with Ibrance leading the way. Some on Wall Street also predict that the company will make an accretive acquisition between now and the end of 2016.
Sales of Ibrance totaled more than $250 million in the firm’s most recent quarterly earnings report. The pill, which essentially doubled the survival rate for certain advanced breast cancer patients, is already being widely prescribed.
Pfizer investors receive a 4% dividend. Merrill Lynch has a $39 price target. The consensus target is $40.19, and the stock closed Thursday at $30.20.