There is always a good side and bad side to the situation when the markets are hitting new all-time highs, especially when it seems like a daily occurrence. The good thing is the statement from your broker looks better, and so does your 401(k). The bad side is that if you have money to put to work, you are nervous about putting it in now, and with good reason. The S&P 500 is up almost 9% since the election, and at some point the sellers will certainly step in.
We screened the Merrill Lynch research data base for stocks that are rated Buy, pay a dividend and haven’t gone parabolic this year. We found five that make good sense for investors.
This company has had a solid run this year but is still trading below highs set in the summer. 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.
AT&T is in the Merrill Lynch US 1 portfolio and has several major catalysts likely to drive strong network traffic demand: DirecTV Now and Mobile, “Data-Free TV” for DirecTV/U-Verse subscribers and increasing penetration of unlimited data plans. Many on Wall Street believe that the company is well-positioned to address ongoing traffic requirements, with additional LTE capacity available and the ability to leverage small cell deployments.
Other top Wall Street analysts have cited the company’s positive commentary on free cash flow and improving video/broadband trends later this year, with single truck-roll and new converged offerings expected to be coming next month.
AT&T investors receive a 4.75% dividend. The Merrill Lynch price objective for the stock is $46. The Wall Street consensus target price is $41.14. Shares closed Tuesday at $41.36.
This top consumer media company has multiple streams of income to push revenue. Walt Disney Co. (NYSE: DIS) is down for the year and may be offering investors the best entry point in some time. With the movie studio business poised to improve, as with accelerating theme park business, the network programming continues to drive viewership with extensive sports programming. Combining that revenue growth with the company’s solid media networks and interactive presence, and 2016 and 2017 revenue estimates could be conservative.
The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels and ABC Family, as well as UTV/Bindass and Hungama. This segment also owns eight domestic television stations. Disney is also one of 24/7 Wall St. top 10 stocks to own for the next decade.
Disney shareholders are paid a 1.51% dividend. Merrill Lynch has a $125 price target, while the consensus price objective is $106.68. The shares closed Tuesday at $103.85.
This iconic blue chip industrial has been on a strong roll since the election, but it is still trading below highs hit last summer. General Electric Co. (NYSE: GE) is a highly diversified, global industrial corporation. Its businesses are organized broadly under six segments: GE Capital, Energy Infrastructure, Aviation, Healthcare, Transportation and Home & Business Solutions. Its products and services include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance.
The company recently announced a huge deal to combine GE’s Oil & Gas business and Baker Hughes to create a leader in oil and gas equipment, technology and services. It will have $32 billion in revenue and can leverage GE’s digital and technology expertise and Baker Hughes domain knowledge, capabilities and presence in oilfield services.
Most on Wall Street are very positive on this deal, which comes on the heels of a failed attempt by Halliburton to buy Baker Hughes. The UBS analysts note that the merger brings what they term as “pure play value, synergies, digital opportunities, perhaps most importantly, earnings accretion.”
GE investors are paid a 3.02% dividend. The $37 Merrill Lynch price objective compares with the consensus target of $32.77. Shares closed yesterday at $31.74.
This company remains the undisputed leader in the home improvement retail category. Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.
Home Depot stores sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance and professional service programs to do-it-yourself (DIY), do-it-for-me (DIFM) and professional customers.
Home Depot could continue to be a benefactor from the damage done in Florida and along the Southeast from Hurricane Matthew. Toss in the huge rebuilding efforts in Louisiana after the severe flooding there, and the third and fourth quarter results could indeed be a bonanza for the company and investors.
Home Depot investors receive a 2.02% dividend. Merrill Lynch has a $158 price target. The consensus price objective is $146.67. Shares closed Tuesday at $136.54.
The fast-food giant still trades well below highs hit in the spring. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.
The company reported very solid third-quarter results after a so-so second quarter. Merrill Lynch noted this when the earnings were released:
McDonald’s reported better than expected this operating results with global same store sales up 3.5%, including the U.S. up 1.3%. We maintain our 2016 GAAP earnings-per share estimate but are raising our 2017 estimate by $0.10. McDonald’s is executing restructuring plans.
McDonald’s shareholders are paid a 3.07% dividend. The Merrill Lynch price target is a whopping $140, and the consensus price objective is $127.76. The shares closed Tuesday at $122.68.
These stocks are trading well below their 52-week highs, and they make good sense for more conservative portfolios. Another good idea is to maybe hop on board early for the 2017 Dogs of the Dow.
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