Investing

The Market Is Overbought: 5 Safe Dividend Blue Chip Stocks to Buy for 2017

Any way you look at it, the market has run for a very long time. In fact, it has been almost eight years since the S&P 500 hit an ominous intraday low of 666 in March of 2009. While everybody has been caught up in the Trump rally that has pushed the Dow Jones Industrial Average to almost 20,000, the fact of the matter is we appear to be very overbought on a short-term basis and could be in for a sizable correction.

With that in mind, if you have money to put to work, or have tax-loss selling that could raise funds, there are some very solid blue chip stocks that are reasonably safe, and offer good dividends. We screened the Merrill Lynch research database and found five that look outstanding for 2017.

AT&T

This company has had an incredible run this year and has rallied back smartly from lows printed in November. 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 4.6% dividend. The Merrill Lynch price objective is $46. The Wall Street consensus target price is $41.29. Shares closed Wednesday at $42.52.

Coca-Cola

This company remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, it is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.

The company reported third-quarter earnings that came in above some estimates, but slower growth and flat volumes brought out the sellers and they tagged the stock big time. It is important to remember though that the company owns 31.5% of Monster Beverage, which continues to deliver big numbers.

Investors receive a 3.37% dividend. Merrill Lynch has a $45 price target, while the consensus target is $45.44. Shares closed Wednesday at $41.39.