This iconic blue chip industrial was on a strong roll after the election, but it rolled over in December and is offering a great entry point. 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.
GE’s fourth-quarter earnings were in line with forecasts, but revenue fell short of the consensus estimate. The hope for a big infrastructure spend is a big positive for the company in 2017 and beyond.
GE investors receive a 3.27% dividend. The $37 Merrill Lynch price objective compares with the consensus target of $34.13. Shares closed most recently at $29.43.
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 huge ongoing rebuilding efforts in Louisiana after the severe flooding there last year and the recent widespread tornado damage.
Merrill Lynch is also very positive on the outlook for home renovation this year and beyond. The firm noted in a recent report:
Private fixed residential investment was the highest correlated factor and increased 5.3% in the fourth quarter of 2016 on a 14.5% increase in the fourth quarter of 2015. We are more bullish than ever on home improvement.
Investors are paid a 2.04% dividend, The $168 Merrill Lynch price target is well above the consensus target of $147.81 and Wednesday’s close at $137.88.
A top telecommunications pick at Merrill Lynch for 2017, Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world. Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
Last year Verizon announced the purchase of Yahoo’s core operating business for $4.8 billion in cash, although terms may be changing due to the massive data breaches at the company. The analysts feel the purchase plays into Verizon’s strategic drive to expand into advertising and content, and they also think the transaction is largely immaterial from a financial perspective.
In addition the Yahoo purchase, recent chatter has linked that company with a possible pursuit of Charter Communications. Merrill Lynch sees the deal as potentially dilutive for free cash flow in the first year but positive in year two. Some see regulatory approval as difficult but possible.
Verizon investors receive a 4.77% dividend. The Merrill Lynch price objective is $59. The consensus target is $52.23. Shares closed Wednesday at $48.37.
These five stocks pay solid distributions, are not trading at all-time highs and are rated Buy at Merrill Lynch. For investors seeking total return these all make good sense, and most importantly, should a big sell-off hit the market, these are not the kind of momentum stocks that will be sold first with questions asked later.