The low yield landscape many thought would start to change by this year is looking more and more like a longer term event. In fact, Bloomberg notes that the demand was so strong for the recent U.S. Treasury’s sale of 30-year debt that Wall Street bond dealers were left with the lowest percentage ever for an auction of the maturity. They also pointed out that the auction yield of 2.596% compares with 0.85% on similar-maturity debt from Germany and about 0.4% in Japan.
What that means for savers and investors looking for income is that stocks with good yields will remain the best avenue for the foreseeable future. We screened the Merrill Lynch research database for stocks that were rated Buy, and had at least a 4% dividend. We found four that fit the bill that look like outstanding values now.
Crown Castle International
This top cell tower stock offers incredible growth and income possibilities. Crown Castle International Corp. (NYSE: CCI) provides wireless carriers with the infrastructure they need to keep people connected and businesses running. With approximately 40,000 towers and 15,000 small cell nodes supported by approximately 16,000 miles of fiber, Crown Castle is the nation’s largest provider of shared wireless infrastructure, with a significant presence in the top 100 U.S. markets.
Numerous Wall Street analysts see the company as the cleanest play on U.S. mobile infrastructure spending. They cite the company’s low risk capital return strategy, upside optionality from the smaller cells and what they consider the company’s investment grade balance sheet. The company is structured as a real estate investment trust (REIT), so the dividends may contain return of principal.
Crown Castle shareholders receive a 4.06% dividend. The Merrill Lynch price target for the stock is $92, and the Thomson/First Call consensus target is $95.17. The shares closed Friday at $87.28.
Shares of this automobile giant look very inexpensive at current levels. Despite all the recall troubles and litigation issues, hedge funds and mutual funds are continuing to stick with General Motors Co. (NYSE: GM), as many view the stock as very undervalued. GM trades near an incredible 5.4 times estimated 2016 earnings. The company, like Ford, has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago and grabbed a big chunk of what is now the world’s largest auto market.
With the company facing continued possible punitive damages over ignition switches, there will continue to be a headline risk cloud over the stock. Long-term patient investors that can look beyond current issues may stand to make outstanding money on the auto giant, especially as oil prices plummet and low gasoline prices continue to push new buyers into showrooms.
The company reported very solid fourth-quarter earnings, and with gas prices staying at the lowest levels in years, and GM producing some of the best new models in years, the future for the battered stock looks very good. GM reports first-quarter earnings on Thursday.
GM investors receive an outstanding 4.93% dividend. The $44 Merrill Lynch price target is well above the consensus target of $37.71. Shares closed Friday at $30.82.