Wall Street Is as Bearish as 2009: 4 Top Dividend Stocks to Buy Right Now

February 2, 2016 by 247lee

If you remember the dark days of 2009, then it may surprise you to know that currently Wall Street strategists and those who prognosticate the future are as bearish as they were then. In a new research note from Merrill Lynch, strategist Savita Subramanian points out that the sell side indicator fell recently to a six-month low of 52.6, which suggests that much of Wall Street is as negative as 2009.

The good news for investors is that kind of over-the-top bearishness is really a positive. Typically huge market drops and bear markets occur when everybody is giddy and speculation is running rampant. Think technology stocks in late 1999 and early 2000. That is hardly the case now, and Subramanian and her team are encouraged by the bearish stance and the persistent underweighting by portfolio managers of U.S. equities.

We screened the Merrill Lynch research universe database and found four outstanding dividend stocks that are rated Buy and also offer tremendous value now.

Cisco

This is one of the top mega-cap technology stock picks on Wall Street, and perhaps a surprising defensive pick for volatile markets like we have witnessed. Cisco Systems Inc. (NASDAQ: CSCO) posted disappointing earnings in November, and many on Wall Street have lowered the price target for the networking giant significantly. Cisco is also one of the 24/7 Wall St. top 10 stocks to own for the next decade.

Last year Cisco won an important contract for the Verizon build-out of its next-generation 100G metro network. While Cisco’s optical business is small as a part of total revenue, this win is seen by Wall Street as a significant endorsement of the investments Cisco has made into its optics business.

Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching and next generation security are also adding to the total sales profile and product mix.

Cisco investors receive a 3.61% dividend. The Merrill Lynch price target for the stock is $30, and the Thomson/First Call consensus target is $30.55. The shares closed most recently at $23.48.


Eli Lilly

This stock checks in at high on the global pharmaceutical lists at many top Wall Street firms and is on the Merrill Lynch US 1 list. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.

While the fourth-quarter numbers were unremarkable in the analysts view, Merrill Lynch is still very focused on the company’s outstanding late-stage product pipeline, which it views as very undervalued. The firm also remains very positive on what it calls the “huge growth potential” prospects for Jardiance, which is a prescription medicine used, along with diet and exercise, to lower blood sugar in adults with type 2 diabetes.

Shareholders receive a 2.6% dividend. The Merrill Lynch price target is $108. The consensus target is $99.20. Shares closed Monday at $78.40.

General Electric

This iconic blue chip industrial was on a strong roll late last year, but it sold off last month and is giving investors a nice entry point. General Electric Co. (NYSE: GE) is a highly diversified, global industrial corporation. Its products and services include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance. Merrill Lynch feels that the American giant will be a large player in the efficient energy field.

The company is in the middle of a huge plan that is scaling back many of its operations and returning capital to shareholders. GE announced a restructuring plan last year that includes buying back up to $50 billion of its shares, selling about $30 billion in real estate assets over the next two years and divesting more GE Capital operations. The continued restructuring and sale of the appliance division provides some cushion to earnings estimates

The company posted solid fourth-quarter numbers that were somewhat hampered by slower organic growth, and the Alstom power division purchase, which the company bought from the French turbine maker. The deal was finalized in November for $10 billion and creates a $50 billion turbine services backlog.

GE investors receive a 3.21% dividend. Merrill Lynch has a $33 price target, and the consensus target is $32.29. Shares closed Monday at $28.64.

3M

This top industrial could really jump with an economic pickup, and it is a member of the Merrill Lynch US 1 list and is one of the firm’s top 10 picks for 2016. 3M Co. (NYSE: MMM) is a diversified, global manufacturer with technology-driven businesses. Its popular brands include Scotch, Post-It, 3M and Thinsulate. The company also holds over 500 U.S. patents.

The company crushed earnings expectations for the fourth quarter and rallied huge. The analysts noted that the execution at the company remains outstanding, as there was strength in consumer and health care across all the company’s regions. With margins expanding, this remains an outstanding stock to own.

3M investors receive a 2.76% dividend. The $178 Merrill Lynch price target is well above the consensus estimate of $160.13. The stock closed Monday at $148.73.


Not only are all these blue chip dividend stocks on sale, they are offering solid dividends and appear to be set up for a very solid rest of 2016. Investors looking to add stocks that will fare well in a higher volatility world would do well adding these to growth portfolios now, especially with Wall Street so negative.