With Long Bull Market Almost Over, Time to Rotate to Safety and Income

The hallmark of one of the longest bull markets in history has been the emergence and leadership of the FANG stocks, or Facebook, Amazon, Netflix and Google (now Alphabet). These four companies, along with some other tech leaders, were responsible for much of the gigantic gains in the S&P 500 over the past almost 10 years. But like all good things that come to an end, these stocks have been absolutely hammered during October and November.

Typically in bull markets when the leadership stocks go, the rest are usually not far behind, and while there still may be some upside left, gains in the coming years may be hard to come by. So now could be the time to look for safety and total return.

We always like to remind our readers about the impact that total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend and it goes up to $22 in a year, your total return is 13%. That is, 10% for the increase in stock price and 3% for the dividends paid.

We screened the Merrill Lynch research database for stocks rated Buy that pay a dividend and have the firm’s best volatility risk rating. We found five that look like solid picks for 2019 and beyond.

American Electric Power

This industry-leading utility is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 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.

Many on Wall Street feel that the stock trades at a discount to its utility peers, and they feel it deserves a premium. Top analysts also think the company may sell generating assets and buy back shares with the proceeds, which would be also accretive.

American Electric Power shareholders are paid a solid 3.81% dividend. The Merrill Lynch price target for the shares is $78, while the consensus price target across Wall Street was last seen at $77.56. The shares closed trading last Friday at $75.86 apiece.


This top Warren Buffet holding not only offers safety but an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Coca-Cola investors are paid an outstanding 3.18% dividend. Merrill Lynch has a $52 price target for the stock, while the posted consensus price target is $51.48. The stock ended last week at $49.02 a share.