After a blistering sell-off following the Brexit decision, the S&P 500 has rallied back to within a few points of all-time closing highs. Combine that with interest rates at historical lows, and investors have been put in a very difficult position: buy here and look for a break-out, sell and hope that earnings take things down to a cheaper entry level, or hold and hope for the rest of the year.
We screened the Merrill Lynch research database looking for blue chip dividend stocks that still make sense in a very pricey market. We also looked to avoid the overbought bond proxy sectors like the utilities and consumer staples. We found four that still look reasonable, and offer investors a degree of safety in what could be a volatile rest of 2016. All are rated Buy at Merrill Lynch.
This iconic blue chip industrial has been on a strong roll, and the currency tailwinds may help to continue the winning ways. General Electric Co. (NYSE: GE) is a highly diversified, global industrial corporation. Its products and services include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance. Wall Street analysts feel that the American giant will be a large player in the efficient energy field.
The company posted solid first-quarter numbers that were somewhat hampered by slower organic growth. GE does an estimated 52.9% of its total sales overseas, so a weaker dollar surely could help the rest of this year and into 2017.
Trading sideways since November of last year, the shares could be ready to break out.
GE investors are paid a 3.0% dividend. The Merrill Lynch price target for the stock is $33, and the Thomson/First Call consensus price objective is $33.17. Shares closed Friday at $32.20.
This company is in the automobile sector, and shares look to be 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 just below ad incredible 5.75 times estimated 2016 earnings. The company, like competitor Ford, has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago, and it 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 the oil price plummet and low gasoline prices continue to push new buyers into showrooms.
The company reported very solid first-quarter earnings back in April, and with gas prices still 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 investors receive an outstanding 5.12% dividend. Merrill Lynch has a strong $42 price target for the stock. The consensus target is much lower at $37.06. Shares closed most recently at $29.66.