After over a year and a half of almost solid upward appreciation by the U.S. dollar, the tide appears to have finally turned some. In fact, after six consecutive quarters of year-over-year depreciation, the euro has shown recent signs of strength, having appreciated about 4.5% year to date. Some top analysts on Wall Street feel that may very possibly convert to a solid revenue tailwind for the second quarter and the rest of 2016.
We ran some screens looking for high-paying dividend stocks that do a substantial amount of overseas, and especially European business, that could benefit from the weakness in the dollar. We then screened those companies against the Merrill Lynch research universe for stocks rated Buy. We found four that make good sense for investors to consider now.
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. 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 $0.05 per share. This is positive growth, and solid in an otherwise low-growth world.
Altria investors receive a 3.54% dividend. The Merrill Lynch price target is for the stock is $66.00, and the Thomson/First Call consensus estimate is $65.75. The stock closed Friday at $63.80.
This company 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, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, it 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.
Top analysts have noted that there are four main drivers of potential continued upside for the stock.
- Volumes are accelerating due to re-franchising.
- The importance of new marketing and the impact on category growth and market share trends.
- A growing cost culture at the company that should result in a best-in-class profit per employee metrics.
- Most importantly perhaps, the emergence of pricing power for the drink giant.
Coca-Cola investors receive a 2.99% dividend. Merrill Lynch has a $48 price target, and the consensus target is $47.14. The stock closed Friday at $46.87.
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