Top Analysts Love These 5 Buy-Rated Dividend Aristocrats for 2017

January 23, 2017 by Lee Jackson

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.

Abbott Laboratories

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.

Chevron

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.

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 results that beat analysts’ estimates, but blamed strong international headwinds and political uncertainty for lower revenue. Revenue was helped by higher prices for sodas and a strong demand for water and sports drinks in North America. This makes seven-straight quarters that the company has surpassed Wall Street’s expectations.

It is also important to remember though that Coca-Cola owns 31.5% of Monster Beverage, which continues to deliver big numbers.

Coca-Cola investors receive a 3.4% dividend. The $50 Merrill Lynch price target compares with the consensus target of $46.72. The stock closed most recently at $41.36.

Lowe’s

Many on Wall Street feel this company deserves a premium multiple to its peers, and it is also on the Merrill Lynch US 1 list. Lowe’s Companies Inc. (NYSE: LOW) operates as a home improvement retailer, offering products for maintenance, repair, remodeling and home decorating.

Categories include kitchens and appliances; lumber and building materials; tools and hardware; fashion fixtures; rough plumbing and electrical; lawn and garden; seasonal living; paint; home fashions; storage and cleaning; flooring; millwork; and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.

The stock was hit hard during the past quarter, and the analysts at Merrill Lynch note that it is trading at a price-to-earnings discount to its rival Home Depot, as well as trading below its five-year and 10-year P/E averages. With earnings expected to grow at an 18% compounded annual growth rate through 2018, adding shares at current levels makes sense.

Investors receive a 1.95% dividend. The Merrill Lynch price objective is $89. The consensus price target is $81.20. Shares closed Friday at $71.76.

3M

This top industrial could really jump with an economic pickup. 3M Co. (NYSE: MMM) is a diversified, global manufacturer. Its businesses are technology-driven and organized under five segments: Consumer, Safety and Graphics, Electronics and Energy, Healthcare, and Industrial. Its popular brands include Scotch, Post-It, 3M and Thinsulate. The company also holds over 500 U.S. patents.

The company reported third-quarter financial results that were essentially in line with the consensus estimates from Thomson Reuters. Earnings per share were higher than in the same period of the previous year, but revenues were flat. 3M updated its full-year forecast by extending the upper range of the earnings per share forecast by a dime. The company now expects organic local-currency sales growth to be approximately flat, versus a previous range of 0% to 1%. The company reports fourth-quarter numbers tomorrow.

3M investors receive a 2.55% dividend. Merrill Lynch has set its price target at $208. The consensus target is $188.93. Shares closed Friday at $178.49.

These five top companies rated Buy at Merrill Lynch have also raised their dividend for 25 consecutive years or longer. For more conservative accounts looking for growth and income, these stocks make good sense for 2017 and beyond.

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