This is probably territory most investors are very uncomfortable with. The fear of a massive global trade war is one that has just not been part of the investing lexicon in years, and while there is a good chance it gets resolved, there is always the chance it stays in the news and percolates.
So what are confused investors to do now? The Federal Reserve just raised the federal funds rate for the second time this year, and it now looks like there will be two more increases to come. Despite that knowledge, worried investors seeking safety have bid the Treasury market up, with the 10-year bond yield back well below the 3% level.
What makes sense now is to buy safe stocks that pay dividends and provide products or services that will continue to be bought or used regardless of what the overall equity market does. We screened the Merrill Lynch research universe and found five companies rated Buy that fit the bill perfectly.
This maker of tobacco products has been hit hard and offers value investors a great entry point now. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy, and the company’s Marlboro brand remains one of the most recognizable in the world. To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine and e-cigarettes. The company also holds a 10% stake in brewer Anheuser-Busch.
Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return plan. The analysts expect continued support of the strong dividend, in addition to continued share repurchase activity.
Altria released first-quarter results that rose from the same period last year, but despite the strong report, the stock was hit hard, and it still trades near a 52-week low.
Altria investors are paid a hefty 4.93% dividend. The Merrill Lynch price target for the shares is $70, and the Wall Street consensus estimate is set at $70.38. The shares traded early Wednesday at $56.85.
With a huge deal in place, this company is poised to become the biggest refinery in the United States. Marathon Petroleum Corp. (NYSE: MPC) is already one of the largest independent petroleum refining and marketing companies in the United States. It is based in Findlay, Ohio, and owns seven refineries in the United States with total throughput capacity of around 1.7 million barrels per day.
The company operates approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.
Marathon Petroleum has agreed to buy rival Andeavor for $23.3 billion in the biggest-ever deal for an oil refiner, and most on Wall Street believe that they can achieve the $1 billion in synergies they have suggested.
Shareholders are paid a 2.47% dividend. Merrill Lynch has a $95 price target for the stock, while the posted consensus target is $93.60. The shares traded at $74.60 Wednesday morning.