Merrill Lynch Says Buy These 5 Dow Jones Industrial Average Laggards

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The venerable Dow Jones industrial average index is home to some of the biggest and best companies in the United States, and it continues to fairly represent the overall economy with just 30 stocks. Up just over 2% so far this year, the index has some members that have struggled and, given their size and liquidity, may be great buys for growth stock investors going forward.

We screened the index for potential underperforming companies against the Merrill Lynch research universe database, looking for stocks that were rated Buy and paid a dividend. We found five that look like great picks for the rest of 2018 and beyond.

DowDupont

This result of a blockbuster merger in 2017 has emerged bigger and stronger, and the stock is on the Merrill Lynch US 1 list. DowDupont Inc. (NYSE: DWDP) is a diversified chemical company with $79 billion in sales in 2017, and it was formed as a result of the merger of Dow and DuPont.

The company is organized in three principal divisions: Agriculture (20% of EBITDA), Material Science (55%) and Specialty Products (25%). It intends to separate these into three public entities by 2020.

The stock has underperformed this year, and the concerns over the trade issues with China are continuing to keep shares under pressure. The stock is down over 15% from highs that were printed in January.

DowDupont shareholders are paid a 2.31% dividend. The Merrill Lynch price objective for the shares is $84, and the Wall Street consensus target was last seen at $81.79. The stock closed Wednesday’s trading at $67.53 a share.

Exxon Mobil

This remains a top Wall Street energy pick and is on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

Exxon posted first-quarter 2018 earnings of $4.7 billion, compared with $4.0 billion a year earlier. Cash flow from operations and asset sales was $10 billion, including proceeds associated with asset sales of $1.4 billion. The second quarter results are due on July 27.

With Americans hitting the road in record numbers this summer, you can bet that plenty of gasoline will be sold to get everybody to their destination, regardless of the somewhat higher prices this summer.

The dividend recently was raised by a nickel per share to $0.82, which now translates to a yield of 3.92%. Merrill Lynch has a $100 price objective on the stock, while the posted consensus target price is $89.58. The stock closed most recently at $83.59 per share.