Even though the markets have had a great run off the lows back in 2009, there is one item that is starting to stare investors in the face. Most of the world equity markets are very dicey as global economies are lousy and large economies like Europe and Japan are being forced to use more stimulus from either asset buying quantitative easing or dropping rates lower than they already are. Toss in the fact that the U.S. Treasury market is way overbought, and you are left with U.S. stocks as the best investment alternative.
We screened the Merrill Lynch research database looking for companies that did all or the bulk of their business in the United States. The following four pay good dividends, supply the home cooking and are rated Buy.
This company has had an incredible run this year, and the Merrill Lynch team sees it going even 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 14.3 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.
The company reported inline numbers for the second quarter, and while the consolidated revenue number was slightly higher than the Merrill Lynch estimate, the EBITDA was slightly below. Company management noted it is on track to meet or exceed current estimates for the year.
Many Wall Street analysts have cited the company’s positive commentary on free cash flow, in addition to improving video/broadband trends later this year, with single truck-roll and new converged offerings expected to be coming in October.
AT&T investors are paid a huge 4.5% dividend. The Merrill Lynch price target is $46, and the Wall Street consensus target is $42.27. Shares closed most recently at $43.29.
American Electric Power
This industry leader is also a solid dividend-paying company. 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. It ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It 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 the 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.
American Electric Power shareholders receive a 3.26% dividend. Merrill Lynch has a $72 price objective for the stock, and the consensus target is $72.85. Shares closed on most recently at $68.64.