With interest rates edging up, but historically still very low, income investors have been backed into a corner while searching for yield. Treasury bonds and bills certainly are not the answer, especially on the long end, and most corporate debt, including high yield, is trading very expensive. So what are investors looking for higher yield to do, especially if they have a more aggressive risk tolerance?
We screened the Merrill Lynch research database for companies, and in one case an exchange traded fund, that have high yields and a Buy rating from the analysts. To be sure, none of these are really suitable for conservative income accounts, but all could be good additions in reasonable share amounts for investors looking for income.
This company offers solid value and is expected to continue get a large dose of government money to provide continuing internet service in rural areas. CenturyLink Inc. (NYSE: CTL) is the nation’s third-largest telephone company and the largest rural exchange provider serving residential, business and wholesale customers.
The company offers broadband services, which allow customers to connect to the internet through their existing telephone lines or fiber-optic cables; multi-protocol label switching, a data networking technology to support real-time voice and video; and private line services for the transmission of data between sites. It also provides Ethernet services, including point-to-point and multipoint equipment configurations that facilitate data transmissions across metropolitan areas and wide area networks.
Back in March shareholders of CenturyLink and Level 3 Communications approved their merger by overwhelming majorities. Wall Street loves this deal, and the synergies the two have combined are very strong.
It should be noted that the analysts at Merrill Lynch were also positive on Frontier Communications, a similar communications provider that was forced to cut its dividend and eventually did a reverse split due to the low share price of the company’s stock.
CenturyLink investors receive a gigantic 9.45 % dividend. Merrill Lynch has a staggering $42 price target for the stock, while the Wall Street consensus target is $26.27. Shares traded early Thursday at $23.40.
Energy Transfer Partners
This energy master limited partnership (MLP) merged with Sunoco Logistics Partners last year. Energy Transfer Partners L.P. (NYSE: ETP) engages in the natural gas midstream and intrastate transportation and storage businesses in the United States.
The company’s Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, and through ET fuel system and HPL system. It owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas. Its Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,300 miles of interstate natural gas pipeline; and has interests in various natural gas pipelines.
The Midstream segment gathers, compresses, treats, blends, processes and markets natural gas. It owns and operates 35,000 miles of in service natural gas, 31 natural gas processing plants, 21 natural gas treating facilities and four natural gas conditioning facilities.
The unitholders receive a 10.58% distribution. The Merrill Lynch price objective is $26, but the consensus target is $28.64. Shares traded Thursday morning at $20.15.