Well, the Chinese appear to have backed the Federal Reserve into a corner, and with our economy sputtering along at a very tepid rate, future increases in the fed funds rate not only look out of the question for this year, they may remain out of the question through 2017. With the Chinese currency pegged to the U.S. dollar, any increase in rates could send the Chinese into devaluation mode, which could prove awful for world financial markets.
So, now that the bad news is over, here is some good news. Some very safe dividend stocks, from sectors that are performing well now, make outstanding buys for income investors looking for safety. We screened for consumer staples, utilities and telecommunications stocks that make sense now in our Wall Street research database. Four look like outstanding choices.
American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.3 million customers in 11 states. The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the country. AEP also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
Many on Wall Street feel that the stock trades at a discount to its utility peers and should deserve a premium. Some top analysts think the company will sell generating assets and buy back shares with the proceeds, which will be accretive.
AEP is rated Buy at Merrill Lynch, and shareholders receive a 3.65% dividend. The Merrill Lynch price target is $62 but could be moved higher. The Thomson/First Call consensus target is $63.55. Shares closed on Thursday at $61.31.
AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.
While shares trade at a very cheap 12.5 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans.
The company announced recently it is working with Salesforce.com to connect Internet of Things data from AT&T’s solutions into Salesforce’s Customer Success Platform. By connecting AT&T M2X into Salesforce’s Service Cloud, companies can automatically create and route service requests, cases or tickets through pre-built workflows.
While fourth-quarter earnings were in line with forecasts and slightly below the Wall Street estimates, a change in accounting for the entertainment group lowered revenue/EBITDA by $300 million for the quarter. The analysts noted that this knocked $0.03 off the bottom line numbers. So all in all, a solid quarter, and another reason for conservative accounts to own the stock, especially with solid DirecTV additions and mid-single-digit earnings growth estimated for 2016.
AT&T investors receive a huge 5.3% dividend. Jefferies has a $40 price target for the Buy-rated stock, and the consensus target is $37.42. Shares closed Thursday at $36.21.