The rally that took place this week has been great, and the reasons from strategists are many, but one thing is for sure: things could get a little more dicey this summer. The first consideration of course is whether the Federal Reserve will raise rates in June or July — one of the two looks like a lock. Secondly, will the United Kingdom exit the European Union? That looks like a jump ball. Lastly, politics. All summer long into the conventions, the rhetoric is going to get louder, and if we have continued civil disorder, that will stir the pot as well.
We know that it is a nonstarter for most investors to just “move to cash,” given commissions, tax gains/losses and other items. One good idea may be to switch from higher beta stocks to lower ones, especially dividend leaders. They will respond better to higher volatility and fare better in a sell-off. We screened the Merrill Lynch research universe for Buy-rated dividend stocks with the firm’s best volatility rating. Four look like good bets now.
This company had an outstanding first quarter from a stock price standpoint and could be poised to go higher. 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.
With its shares trading 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.
AT&T has been focusing on the IP VPN and Ethernet services. This outstanding business model, along with the decline of Verizon’s market share in the arena, has helped the company meaningfully grow its revenues from strategic business services. Apart from taking appropriate technical measures, the company has collaborated with big cloud service providers like Amazon Web Service and data center operators to provide Ethernet connections.
First-quarter revenue of $40.5 billion was 24% higher than in the year-earlier period, primarily due to the July 2015 acquisition of DirecTV for $49 billion in equity value. The company added 2.3 million wireless subscribers during the first quarter. About 328,000 of the additions were DirecTV net adds. The company’s Entertainment Group broadband grew with 186,000 IP broadband net adds.
AT&T investors receive a huge 4.94% dividend. The Merrill Lynch price target for the stock is $42. The Thomson/First Call consensus estimate is $39.57. Shares closed Thursday at $38.84.