Investing
Why Merrill Lynch Wants You to Buy 4 High-Yield Dividend Aristocrat Stocks
March 28, 2016 8:20 am
Last Updated: January 13, 2020 11:29 am
One of the best investments that can be made is buying the S&P 500 dividend aristocrat stocks. That is a collection of 52 companies that have raised dividends each year for at least 25 years, according to S&P Dow Jones Indices. Not only are these outstanding companies, the aristocrats have outperformed the S&P 500 over the past 10 years.
We ran a screen of the highest yielding stocks in the aristocrats to find which were also rated Buy at Merrill Lynch. We found four that fit the bill. Not only can investors feel good about the ongoing dividends, but they have the fundamental research and Buy ratings to back up the investment.
AT&T
This company will continue to serve customers regardless of where oil or the Chinese yuan trade, and the stock and is on the Merrill Lynch US 1 list. 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.
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. Merrill Lynch notes that this knocked three cents off the bottom-line numbers. 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.
The AT&T AdWorks division is the self-described leader in Addressable TV advertising. It combines unparalleled scale in addressable TV advertising with the best targeting capability in the TV business to deliver a better return-on-investment for advertisers. The AdWorks product suite includes: Addressable TV Advertising, TV Blueprint, Interactive TV and Premium Digital Video Advertising (including Otter Media properties). This is helping to drive revenue at the telecommunications giant.
AT&T investors receive a huge 4.94% dividend. The Merrill Lynch price target for the stock is $40, and the Thomson/First Call consensus estimate is $37.85. Shares closed most recently at $38.88.
This is one of Merrill Lynch’s top 10 picks for 2016. Exxon Mobil Corp. (NYSE: XOM) is an energy sector play that the Merrill Lynch analysts are very positive on long term as the overall corporate strength of the massive integrated giant plays a significant part in the company’s usually solid earnings reporting pattern and in maintaining dividend coverage.
The global downstream chemical segment plays a huge part for Exxon, a part that many others on Wall Street don’t fully appreciate as the segment contributes an estimated 16% of overall total revenue. Some very solid reasons for adding the stock to a long-term growth portfolio are that the company has consistently demonstrated disciplined investing, operational excellence and technological innovation.
Exxon recently appointed the head of its refining business as its new president, which makes him the probable successor to CEO Rex Tillerson, a move designed to avoid raising eyebrows on Wall Street. The new president, Darren Woods, is a 23-year company veteran and should keep the energy giant on the steady path for growth and progress.
Exxon investors receive a 3.48% dividend. The Merrill Lynch target price is $95. The consensus price objective is lower at $80.52. Shares ended last week at $83.98.
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