It seems almost incredible that it takes a month-long rally just to get the markets back to breakeven for the year, but that’s exactly what it has taken. With earnings season ready to fire up, and stocks getting pricey, many investors are trying to make a decision on which way to steer their portfolios, not only for the second quarter, but for the rest of 2016.
One good way to invest is to consider the stocks in the Merrill Lynch High Quality and Dividend Yield screen. The portfolio contains stocks with solid return on equity greater than the aggregate of the S&P 500, lower debt to equity than the S&P 500, a dividend yield higher than the overall S&P 500 and S&P common stock rating of at least A-.
Merrill Lynch has added one new company to the list, and we also screened for the three highest yielding stocks in the group. All are rated Buy at Merrill Lynch.
This company has a diversified mix of business, posted solid fourth-quarter numbers and is the newest addition to the High Quality and Dividend Yield screen. Raytheon Corp. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services.
Raytheon is not only likely to benefit from domestic defense purchasing, but it has posted large contract sales to the Saudis over the past two years. Last year Raytheon purchased privately held cybersecurity company Blackbird Technologies for about $420 million. The acquisition will help expand its surveillance and cybersecurity services. Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services.
Raytheon investors receive a 2.36% dividend. The Merrill Lynch price target for the stock is $150, and the Thomson/First Call consensus target is $140.19. The shares closed Monday at $124.22.
Procter & Gamble
This stock is trading at the same level it was this time last year, in part because the company has a very large 65% of sales directed to foreign customers. That should improve as the dollar’s run looks to be slowing. Procter & Gamble Co. (NYSE: PG) is a solid consumer staples stock especially for conservative investors to consider. The company sells lots of run-of-the-mill household items that are essential for everyday life, and it is not content to rest on its laurels.
The company is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends. While currency headwinds have weighed on recent earnings and projections, the dollar may be topping out this fall, and that would bode well for the future.
The company posted very solid fourth-quarter results in January and, despite earning expectations that have been lowered somewhat, Merrill Lynch feels comfortable that the stock can continue the current positive momentum.
Shareholders receive a 3.19% dividend. Merrill Lynch has as $89 price target, and the consensus target is $83.20. Shares closed Monday at $83.21.