According to the old Wall Street trading adage, “The market goes up like an escalator, and down like an elevator.“ Many times, that is exactly what happens. After what seemed like a pretty quick 20% dive back in the last part of 2018, the market has rallied back 20% from the lows set in late December, almost three months ago.
The bottom line is that once again the overall market appears overbought, and while we are nowhere near the astronomical valuations seen during some other frantic periods, there may for sure be some selling into the first quarter earnings prints next month. In addition, most money managers, many of whom unperformed their benchmarks last year, may be itching to post a solid first quarter.
We decided to once again screen the Merrill equity research database for conservative stocks that are rated Buy, pay dividends and have the firm’s best (or lowest) volatility risk rating. We found five that, while not super-exciting, may be super-safe moves as the quarter winds down.
This top dividend payer is also a very safe consumer staples play for investors. Colgate-Palmolive Co. (NYSE: CL) continues to deliver solid execution and is one of the best-positioned companies in its sector, given its strong brands in attractive categories, particularly oral care.
Over half of Colgate’s total revenues (52%) are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across Brazil, Russia, India and China. While those have slowed over the last year, a pickup in growth could be coming, especially with a very weak dollar making products attractive overseas.
Colgate-Palmolive investors are paid a 2.56% dividend. The Merrill Lynch price target for the stock is $73, and the Wall Street consensus price target was last seen at $64.07. The shares closed Monday trading at $66.29.
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 3.53% dividend. Merrill Lynch has a $55 price target for the stock, while the posted consensus price target is $50. The stock closed Monday at $45.41 per share.
This company remains a top energy pick and also posted some solid fourth-quarter results. 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.
For 75 years in a row, Exxon Mobil has its dividend (split-adjusted, of course). Thanks to its vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.
Exxon shareholders are paid a nifty 4.09% dividend. The $105 Merrill Lynch price objective is well above the $83.99 consensus target price. The stock ended Monday’s trading at $81.08 a share.
This fast-food giant does a ton of business overseas but still remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global food-service retailer with over 37,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local businesspersons.
McDonald’s shares have been positive recently as menu price increases and global growth fueled a strong fourth-quarter earnings report. EPS came in above the consensus forecast, though U.S. comparisons were a bit light at up 2.3%. Capital expenditures guidance for fiscal year 2019 was $2.3 billion, with just under $1 billion of that going toward 2,000 U.S. remodels.
McDonald’s shareholders receive a nice 2.54% dividend. Merrill Lynch has set its price target at $200. The posted consensus figure is $197.69, and the shares were last seen on Monday changing hands at $183.95 apiece.
Procter & Gamble
The stock offers a very solid dividend and safety, and it is on the Merrill Lynch US 1 list. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies, and it operates in five segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby & Family Care. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.
The company actually is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends.
Shareholders in Procter & Gamble are paid a 2.80% dividend. The Merrill Lynch price target is $110. The Wall Street consensus price objective is $98.07, but the stock closed at $101.51 on Monday.
Even these safer, low-volatility stocks have run during the rally that started in late December, but they should hold better during market turbulence than crowded tech and momentum companies. Plus, they are all very well suited for more conservative accounts.