5 Merrill Lynch Stocks to Buy Yielding 5% or More as Rates Plunge

November 7, 2017 by Lee Jackson

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.

AllianceBernstein

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.

Blackstone

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.

Kimco Realty

This top real estate investment trust (REIT) makes sense for more conservative accounts. Kimco Realty Corp. (NYSE: KIM) has specialized in shopping center acquisitions, development and management. The company owns and operates the nation’s largest portfolio of neighborhood and community shopping centers, with interests in the company owned interests in 745 shopping centers, comprising 108 million square feet of leasable space in North America. The U.S. portfolio consists of 71 million square feet.

The company reported earnings that beat Wall Street estimates and raised the guidance slightly higher for 2017, as well as raising the dividend 4% — all positive in a world where brick-and-mortar retail has taken some shots. The company’s development pipeline also looks solid and should be a positive to the profit and loss statement.

Kimco shareholders are paid a solid 6.02% distribution. The $22 Merrill Lynch price target is essentially in line with the consensus target of $22.22. The shares were last seen trading at $18.85.

Kohl’s

This top retailer has traded sideways for almost all of 2017, and it offers decent upside potential. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States that offer private label, exclusive and national brand apparel, footwear, accessories, beauty and home products to children, men and women customers. The company also sells its products online at Kohls.com and through mobile devices.

While retail chains have suffered from internet pressure, Kohl’s has held its own as consumers see the company as a solid discount retailer. In addition, Amazon is growing its partnership with the department store chain. Last summer, the two companies announced that Kohl’s would begin selling Amazon devices, such as the Echo and Fire tablets, at 10 of its stores. Kohl’s also will be accepting Amazon.com returns at certain U.S. locations.

Kohl’s investors are paid a 5.16% dividend. Merrill Lynch has set its price target at $51. The posted consensus target is $42.76, and the stock traded on Tuesday at $42.10.

Verizon Communications

This top telecommunications company has been among the worst performing stocks in the Dow Jones Industrial Average for much of this year and is down over 15% year to date. 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.

The company posted solid third-quarter results, and its stock remains a safe and solid growth and income play. The Merrill Lynch analysts said this at the time:

Verizon third quarter earnings per share of $0.98 was just ahead of consensus of $0.97 and $0.01 short of our $0.99 forecast. Verizon added 274,000 postpaid phone customers in the quarter, which was better than consensus of 251,000. Wireless service revenue inflected positive quarter over quarter for the first time in 3 years.

Verizon investors are paid an outstanding 5.2% dividend. The Merrill Lynch price target is $2. The consensus target is $49.59, and the stock traded recently at $44.95 per share.

These five stocks could be great total return stories that also offer investors a degree of safety in what has become a very expensive stock market. All make sense for more conservative growth and income accounts, and they are still solid buys now.

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