Even though the economy clocked in a stunning 3.2% gross domestic product in the first quarter, way above estimates, and earnings mostly have been solid, there are warnings signs. Growth at some levels is slowing dramatically, and the stock market by historical valuation metrics is fully priced at current levels. That may be one reason that despite the big first-quarter GDP blowout number on Friday, stocks were only marginally higher that day.
Given the continued generational lows in interest rates, as evidenced by the 30-year U.S. Treasury bond sporting a paltry 2.92% yield, it makes sense to look for top companies not trading at all-time highs that pay solid dividends. We screened our 24/7 Wall St. research database and found five stocks that are rated Buy, with low valuations and big dividends, that make sense now for growth and income investors.
This is a telecom component on the prestigious Merrill Lynch US 1 list. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE.
This telecom giant also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. Trading at a very cheap 9.4 times estimated 2019 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
The company reported a mixed earnings bag for the first quarter, and Merrill Lynch said this:
On a consolidated basis, 1Q revenue, EBITDA, and EPS were all pretty much in line with consensus estimates. Entertainment EBITDA was ahead of both us and the Street, as AT&T was able to bend the cost curve and drive up video average revenue per user. Due to definition changes, AT&T’s implied capex guidance is $20 billion and not $22 billion where the Street consensus is today.
Investors receive a massive 6.51% dividend. The Merrill Lynch price target for the shares is $37, and the Wall Street consensus target is $33.88. The stock ended trading on Friday at $30.68.
This maker of tobacco products offers value investors a great entry point now. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In addition, to help lagging cigarette demand, in December 2018 it acquired 35% of JUUL Labs. But Altria came in with a mixed bag of first-quarter results, and the stock has been weak recently. Merrill Lynch noted this on the results:
Net sales for the quarter totaled $3.9 billion, -$237 million versus our forecast and led by weaker than anticipated cigarette volumes. Altria management reaffirmed its guidance for 2019 EPS to be in a range of $4.15 to $4.27 (unchanged) despite higher fuel prices.
Shareholders receive a 6.09% dividend. Merrill Lynch has set a $66 price target, while the lower consensus target is $59.47. Shares were last seen trading at $52.79.