Despite all the concern over the potential for rising interest rates and an increase in inflation, Treasury yields, which had moved dramatically higher over the past month, have tapered off some. One thing is for sure: the volatility that came back into the market with a lightning 10% sell-off in early February looks here to stay, so moving to a more defensive growth posture may be a solid idea.
One way to add total return is to buy growth stocks that pay solid dependable dividends. We screened the Merrill Lynch research universe and found five companies rated Buy that all pay at least a 4% dividend, that look like outstanding portfolio picks for the second quarter.
The maker of tobacco products and wine has posted very solid numbers and remains a solid play for income investors. 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 raised the dividend by 8.2% in 2017.
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 a large amount of its pre-excise tax revenue last quarter.
Altria investors are paid a hefty 4.25% dividend. The Merrill Lynch price target for the shares is $82, and the Wall Street consensus estimate is $77.46. Shares traded early Wednesday at $65.75.
This limited partnership is a solid holding for investors looking for private equity exposure. Carlyle Group L.P. (NYSE: CG) is a leading global alternative asset manager, providing investment management services across four operating segments, including Corporate Private Equity, Global Market Strategies, Real Assets and Fund of Funds Solutions. Carlyle has offices worldwide and is headquartered in Washington, D.C.
The company recently reported very strong quarterly earnings, and analysts at Merrill Lynch noted the strong performance fees and income from investments as a leading factor.
Carlyle Group investors are paid an outstanding 6.12% distribution. Merrill Lynch has a $32 price target on the stock, which compares with the consensus target of $28.88. The shares traded Wednesday morning at $22.95.