As Institutional Investors Continue to Sell, 4 Safe Dividend Stocks to Buy and Hold

March 23, 2016 by 247lee

Though the markets have fought their way back to even after a horrible start to the year, one very interesting anomaly continues to show up. According to Merrill Lynch, for the eighth consecutive week, its clients sold U.S. stocks, the longest selling streak since 2010. In addition, institutional clients have been the biggest net sellers in recent weeks. Do they know something we don’t know? Or are they pressured by bad performance and need to reset portfolios?

One positive data point the analysts did share was that buybacks by the firm’s corporate clients are tracking a whopping 45% higher the year-ago levels. That in of itself may be helping to keep a bid under the markets. Given that overall Merrill Lynch remains bearish, we screened the firm’s universe of stocks for safe companies rated Buy. We found four that make good sense now.

Altria

Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate. Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb, and strong share repurchase activity.

To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller, which together generated nearly 10% of its pre-excise tax revenue last quarter. With SABMiller being acquired, Altria will have a huge stake in the world’s biggest beer company.

While fourth-quarter earnings came in slightly below estimates for the first time in almost two years, the company expects 2016 full-year adjusted diluted earnings per share to be $3.00 to $3.05, which excludes the restructuring charges of approximately a nickel per share. This is positive growth, and solid in an otherwise low growth world.

Altria investors receive a 3.70% dividend. The Merrill Lynch price target for the stock is $66, and the Thomson/First Call consensus estimate is $64.88. The stock closed Tuesday at $61.


Coca-Cola

This remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, the company is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.

The strong U.S. dollar could continue to be a headwind to the international business, but the company has expanded the product line and posted fourth-quarter earnings that Merrill Lynch was very encouraged by.

Coca-Cola investors receive a 3.08% dividend. Merrill Lynch has a $48 price target, and the consensus figure is at $46.36. The stock closed Friday at $45.50.

Kroger

Even if the pessimists are right, people always have to go to the grocery store, and this company dominates. The Kroger Co. (NYSE: KR) not only operates as a retailer in the United States and internationally, it also manufactures and processes food for sale in its supermarkets.

The company operates retail food and drug stores, multi-department stores, jewelry stores and convenience stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood and organic produce. The multi-department stores provide general merchandise items, such as apparel, home fashion and furnishings, outdoor living, electronics, automotive products, toys and fine jewelry. Its price impact warehouse stores offer grocery and health and beauty care items.

The company operates stores under the banner names of Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Harris Teeter, Jay C, King Soopers and others. As of August 18, 2015, the company operated 2,626 supermarkets and stores in 34 states and the District of Columbia, as well as 780 convenience stores, 327 fine jewelry stores, 1,342 supermarket fuel centers and 37 food processing plants in the United States.

Kroger shareholders receive a 1.11% dividend. The $45 Merrill Lynch price target is a little higher than the consensus target of $43.27. The stock closed most recently at $37.95.

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.

Fourth-quarter earnings were in line with Merrill Lynch and consensus expectations. While the overall 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 to lower blood sugar in adults with type 2 diabetes.

Shareholders receive a 2.84% dividend. The Merrill Lynch price target is $108. The consensus target is $95.52. Shares closed Tuesday at $71.92.


There you have it, four solid companies to buy and hold. They all can do well, and even if the market sells off, the demand for their products and services will not. Plus, they all offer a dividend, which will pay investors to wait should they trade sideways.