It’s one thing to have scary up-and-down markets, but it’s quite another when there are very few alternatives. Income investors, and most investors in general, can’t “go to cash” as so many cavalier financial talking heads often suggest. Commissions are prohibitive, and the yields on cash-type investments like certificates of deposit (CDs) are abysmal. The good news is there actually are a few safe places investors can head to now for safety and income.
We screened the Merrill Lynch research data base for telecommunication, utilities and consumer staples/discretionary stocks that pay solid dividends and are safe places to put money for the time being. We found four rated Buy that makes good sense for nervous investors now.
This higher yielding company was recently upgraded by Merrill Lynch. Entergy Corp. (NYSE: ETR) is an integrated energy company engaged primarily in electric power production and retail distribution operations. It owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power, making it one of the nation’s leading nuclear generators. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $12 billion and approximately 13,000 employees.
Many analysts like the position of the company’s plants, as they supply some of the petrochemical industry along the Gulf Coast. Petrochemical plants and liquefied natural gas export facilities are springing up all across the central Gulf coast. For the petrochemical industry, the boom is driven by demand, not supply, and so the current lower gas prices actually help this growth trend, which has been a solid revenue silo for Entergy.
Entergy investors are paid an outstanding 5% dividend. The Merrill Lynch price target for the stock is $72, and the Thomson/First Call consensus target is $72.06. The stock closed Friday at $68.09.
The fast-food giant has been on fire over the past six months, but it still remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global food service retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business men and women.
Merrill Lynch, like many, is very pleased with the efforts from new CEO Stephen Easterbrook. He is taken the bull by the horns with a strategic corporate reset by changing the menu, updating the hours breakfast is served and modernizing the restaurants. Management has said that dividend growth is a key element of its shareholder value proposition. McDonald’s has increased its dividend every year for the past 39 years.
The company reported outstanding fourth-quarter results in late January, with U.S. same-store sales rising an impressive 5.7%, boosted by all-day breakfast. The analysts raised their 2016 earnings estimate from $5.25 to $5.30 per share.
McDonald’s investors receive a solid 3.08% dividend. Merrill Lynch has a $130 price target, and the consensus target is posted at $126. The stock closed Friday at $115.40.