A rally on Tuesday and strength on Wednesday feels like a welcome relief after two very depressing trading sessions. Still, one thing seems to be assured. The British exit, hence Brexit, from the European Union will have repercussions for some time. This is particularly true for many of the major corporations that do business in Britain and in Europe.
Eventually things will get sorted out. There is even an outside chance that if trade deals and other items that bothered the voters are addressed and changed, there could be a re-vote.
In the meantime, why not focus on companies that do the bulk of their business in the United States while the whole messy issues gets sorted out. 24/7 Wall St. screened the Merrill Lynch research data base for Buy rated companies that do the bulk of their business here at home, and found four that make good sense now.
This company has an outstanding first and second 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. The company has TV customers in the U.S. and 11 Latin American countries after its DirecTV merger. In the U.S., 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. Trading at a very cheap 14.3 times estimated 2016 earnings, the company continues to expand their user base, and strong product introductions from smartphone vendors has not only driven traffic, but increased device financing plans.
AT&T reported adjusted first-quarter earnings of 72 cents per share on revenue of $40.5 billion back in April. Revenue rose 24 percent versus 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. Its Entertainment Group broadband grew with 186,000 IP broadband net adds.
AT&T investors are paid a solid 4.57% dividend. The Merrill Lynch price target is posted at $42, and the Thomson/First Call consensus is set at $39.46. Shares closed yesterday at $42.02.
American Electric Power
This industry leader is also a solid dividend paying company which only 10.2% of fund managers own. American Electric Power Co., Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.3 million customers in 11 states. The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. American Electric also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
Many on Wall Street feel that AEP’s stock trades at a discount to its utility peers and they feel it deserves a premium. They also think the company may sell generating assets and buy back shares with the proceeds which will be accretive. Some on Wall Street feel that a Genco sale could fetch as much as $2 billion, and while the earnings would be missed, reinvestment and/or purchases could fill the gap.
American Electric Power shareholders are paid a solid 3.37% dividend. The Merrill Lynch price objective is $68, and the consensus is at $68.18. Shares closed on Tuesday at $68.64.
This top grocer does almost all of their business right here in the U.S. The Kroger Company (NYSE: KR) operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; multi-department stores provide general merchandise items, such as apparel, home fashion and furnishings, outdoor living, electronics, automotive products, toys, and fine jewelry; and price impact warehouse stores offer grocery, and health and beauty care items, as well as meat, dairy, baked goods, and fresh produce items.
The company operates under the banner brands, such as Kroger, Ralphs, Fred Meyer, King Soopers, etc., as well as Simple Truth and Simple Truth Organic brands. As of January 30, 2016, the company operated 2,778 retail food stores, including 1,387 fuel centers; 784 convenience stores; and 323 fine jewelry stores and an online retail store, as well as franchised 78 convenience stores.
Kroger shareholders are paid a 1.33% dividend. The Merrill Lynch price target is set at $45, and the consensus is at $41.50. The shares closed Tuesday at $36.05.
This company continues to expand routes, and remains a low cost leader, it is also one of the top airline pick across Wall Street. Southwest Airlines, Inc. (NYSE: LUV) continues to increase the footprint and brand awareness all over the country. With the domestic market showing reasonably good strength, and the pricing environment looking very solid for the rest of 2016 and through next year, revenues should stay strong and continue to grow. Jet fuel prices which still remain much lower than in past years, is almost 30% of Southwest’s total costs and have been a key for improving revenues and earnings. With almost no international business at this time, the stock remains a good long term holding.
Based on the U.S. Department of Transportation’s most recent data, Southwest Airlines is the nation’s largest carrier in terms of originating domestic passengers boarded. The company operates the largest fleet of Boeing aircraft in the world, the majority of which are equipped with satellite-based WiFi providing gate-to-gate connectivity.
Southwest shareholders are paid a 1.07% dividend. The Merrill Lynch price target is posted at a whopping $56, while the consensus is lower at $53.82 The stock closed Tuesday at $37.43.
Theses are clearly not the most exciting companies on Wall Street, but if you are an investor concerned over the ramifications of the Brexit, then these could be just right for you. They all are among the top plays in their respective sectors, and these four well established companies with long track record and dividends fit within the suitability tests for just about every sort of investor.