4 Stocks to Buy Now as US Dollar Continues Taking a Beating

September 11, 2017 by Lee Jackson

As we have mentioned before, while government wonks and economic bureaucrats always bemoan a weak dollar and say they are advocating for stronger U.S. currency, the fact of the matter is the weaker the dollar, the cheaper our goods and services are overseas. It also helps to buoy the price of oil, as it is priced in U.S. dollars, and our increasing exports of the commodity get a boost.

Last week the dollar continued getting thrashed as the dollar index, or DXY, printed levels at its lowest since December 2014, near 91.00. Continued losses have led to suggestions that many bulls have given up on the currency. Toss in the fact that low inflation is giving Federal Reserve officials second thoughts about another rate hike this year, and you have all the ingredients to keep the greenback low.

We screened the Merrill Lynch research database for companies rated Buy that do a substantial amount of their business overseas. These four top stocks make good sense for investors looking to take advantage of the current dollar weakness.

Altria

The maker of tobacco products and wine posted very solid numbers in the first half of the year, and the third quarter is looking good as well. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world.

Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate. Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb along with strong share repurchase activity. The board also recently raised the dividend by 8.2%.

To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller, which together generated nearly 10% of its pre-excise tax revenue last quarter.

Altria investors receive a 4.21% dividend. The Merrill Lynch price target for the stock is $78, which compares with a Wall Street consensus estimate of $71.69. Shares traded Monday morning at $62.60.

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, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one 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 Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers. And the company posted solid-second quarter results recently.

Investors receive a 3.2% dividend. Merrill Lynch has a $50 price target, while the consensus target is $47.44. Shares traded Monday at $46.45.

McDonald’s

The fast-food giant does a ton of business overseas and still remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.

The company reported solid second-quarter results, but the U.S. store comparisons of just 1.8% were disappointing to investors. Merrill Lynch noted that charges and refranchising gains make the earnings numbers a bit dicey, so the firm lowered its estimate.

McDonald’s shareholders receive a 2.35% dividend. The $185 Merrill Lynch price target is well above the consensus price objective of $171.08. The shares were trading at $160.95.

Procter & Gamble

This stock also offers a very solid dividend and safety. Procter & Gamble Co. (NYSE: PG) is another solid consumer staples stock for conservative investors to consider. It sells lots of very well-known household items that are essential for everyday life. Brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.

The company posted solid earnings last quarter, and many on Wall Street feel that the new focus on a slimmed down product portfolio will help spur earnings growth and return the company to its long-time premium consumer staples multiple.

P&G actually is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends. While currency headwinds have weighed on earnings and projections, a weaker dollar scenario would bode well for the future.

Shareholders receive a 2.97% dividend. The Merrill Lynch price objective is $98. The consensus target is $91.59, and shares traded on Monday at $93.20.

While all these companies do depend on continued consumer support around the globe and here it home, they all make reasonably priced products that are used daily. They also provide a degree of safety, pay good dividends and, most importantly, don’t go out of style.

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