The pricier the market gets, the more it makes sense to stay with industry leaders, especially those that have paid and raised their dividends consistently. One of the most famous groups of stocks that can lay claim to these areas is the Dividend Aristocrats. Those are S&P 500 constituents that have increased their dividend payouts for 25 consecutive years. The companies that make up the Dividend Aristocrats span 10 different business sectors, with both growth and value holdings.
We cross-referenced the Dividend Aristocrats with the Merrill Lynch research universe and found five stocks that are rated Buy at the firm and look like solid stocks to own for 2017. Given the expensive levels the market is trading at, it may make sense to buy partial positions now and see if we don’t get a first quarter pull-back.
Shares of this top pharmaceutical stock with very solid growth potential are down over 10% since last August. Abbott Laboratories (NYSE: ABT) is a leading diversified global health care company that develops, manufactures and markets branded generics, medical devices, nutritional products and diagnostic solutions.
The company recently agreed to acquire the equity in Minnesota-based Tendyne Holdings that it does not already own for $250 million plus future payments tied to regulatory milestones. Wall Street likes the purchase and the way the company is putting its substantial balance sheet to work.
The company also offers a diversified large cap play as earnings are split between five well-positioned business segments: Nutritionals (31.0% of revenues), Vascular (13.0%), Generic Pharmaceuticals (20.0%) and Diagnostics (25.5%) and Diabetes (10.5%).
Last year, CEO Miles White, who has been at the firm for over three decades, bought a stunning $45.5 million worth of company stock, which added to his already substantial holdings. The purchase made him one of the top 100 shareholders.
Abbott Labs investors receive a 2.62% dividend. The Merrill Lynch price target for the stock is $50, and the Wall Street consensus target is $46.69. The shares closed last Friday at $40.46.
This stock is very solid story for investors looking to stay long the energy sector, and it is a preferred U.S. company to own now. Chevron Corp. (NYSE: CVX) is an integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. It sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.
The company’s Permian Basin assets are a goldmine, and that the Australian LNG business will transition from a yearly $8 billion capital consumption drag to a $2 billion to $3 billion contributor. Combined with the much lower overall capital spending for the 2016 to 2018 period, the company is poised to not only hang around, but end the sector slump in a much better position. The analysts note the Permian acreage is profitable at $40 a barrel.
CEO John Watson has made it clear that preserving the dividend for investors is the top priority. Wall Street analysts point out that although the company trades in line with its peers, the growth potential and solid balance sheet deserve a 10% premium.
Chevron investors receive a 3.74% dividend. Merrill Lynch has a $145 price objective. The consensus price target is $124.46. Shares closed most recently at $115.68.