5 Dividend Blue Chips to Buy for Safety During the Summer
It has happened consistently since the big sell-off in early February. The days of investors buying every dip appears to be over, and in fact, it now seems that every rally is met by a large horde of sellers. While this might be perplexing to investors who have seen incredible first-quarter earnings and an economy that seems much stronger, the reality is we are in the back end of a long market rally.
Given what appears to be a new normal, we decided to screen the Merrill Lynch research database for large, liquid blue chips that are rated Buy and offer a degree of safety as we get close to the slower summer trading months. We found five companies paying dividends much higher than the current Treasury yields, and their shares look like great additions to long-term growth portfolios.
This maker of tobacco products and wine has been hit hard and offers value investors a great entry point. 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.
The company said its earnings for the first quarter rose from the same period of last year. Despite the strong report, the stock was hit hard and traded near a 52-week low.
Altria investors are paid a hefty 4.97% dividend. The Merrill Lynch price target for the shares is $70, and the Wall Street consensus estimate is $70.38. The stock closed Thursday at $56.36 a share.
American Electric Power
This industry leader is a solid dividend payer. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.3 million customers in 11 states.
The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
American Electric Power shareholders are paid a solid 3.61% dividend. Merrill Lynch has a $78 price objective, and the consensus target price was last seen at $72.75. Shares closed on most recently at $69.24 apiece.