The bond bears were just saying it recently: rates are going higher, the 25-year bond bull market is over and the downtrend line from years ago finally has been breached. For a couple of weeks it looked like the pundits, who may very well be short the Treasury market, may be right. The yield on the 30-year U.S. Treasury bond came within two basis points of hitting a 3% yield in late October. Then just like that, wham, a quick move of 20 basis points, or on-fifth of 1%, in a matter of days.
While a combination of things may be weighing on interest rates, one thing’s for sure, even though the market is pretty sure the Federal Reserve will lift rates one-quarter of 1% next month: long rates are dropping again.
While low rates are great for those looking to get a mortgage or a loan and buy a new home or car, they are awful for those who live on investment income. So with that in mind we often search our 24/7 Wall St. research database looking for Buy-rated stocks that have solid dividends. We have found five rated Buy at Merrill Lynch that fit the bill.
Shares of this top money management firm makes good sense for investors now. AllianceBernstein Holding L.P. (NYSE: AB) is among the most diversified managers with assets in mutual funds, SEP accounts and high net worth investments. The company is majority-owned by AXA Financial, and as a master limited partnership (MLP), it distributes its available cash flow quarterly and enjoys low tax rates.
The company barely missed earnings but was hit hard. The analysts love the stock and said this in their research report:
AllianceBernstein reported adjusted earnings per share of $0.51, below estimates of $0.52, though ex one time items, core came in at $0.57, with healthy flows. Given the results/outlook, we take our 2018 earnings up by 3% to $2.27 from $2.21 and our PO to raised by $1 (no change to 13x P/E). Given the company’s yield , healthy flows, margin upside, 20% discount to peers, and our outlook for above average growth, we reiterate Buy.
Investors in AllianceBernstein are paid a massive 8.02% distribution. The Merrill Lynch price target for the shares is $29, and the Wall Street consensus target is set at $28.50. The shares traded early Tuesday at $25.35 apiece.
This is another top money management company and its shares make sense for more aggressive growth and income investors. Blackstone Group L.P. (NYSE: BX) is one of the largest global alternative asset managers. Blackstone manages investments and provides services across four operating segments: Private Equity, Real Estate, Credit and Hedge Fund Solutions.
Blackstone also launches and manages private equity funds, real estate funds, funds of hedge funds and credit-focused funds for its clients. It invests in private equity, public equity, fixed income, and alternative investment markets.
Blackstone investors are paid an outstanding 7.02% distribution. Merrill Lynch has a $40 price target on the stock. The posted consensus target is a bit lower at $39.68. The stock traded Monday morning at $33.05 per share.