Worried About Even More Tariffs? 4 Stocks to Buy With Very Limited Trade Exposure
Depending on whom you listen to, the tariffs levied on products coming into the United States from abroad has either started a trade war that will hasten a new depression or it ultimately will speed up the time it takes to negotiate new trade deals. One thing’s for sure: President Trump, and many other trade experts as well, have said for years that tariffs imposed on American companies are wrong, not only in China, but in Europe and elsewhere, and the massive trade imbalances they help to create need to be addressed once and for all.
That being said, many investors are concerned that the growing trade issues will affect the stocks they own, as foreign nations impose tariffs on our exported products and services, which is indeed what we have seen as China has matched our tariffs.
We screened the Merrill Lynch research universe database looking for companies that do most of the business they conduct here in the United States, with little if any exporting of products or services. We found four that look like good stocks to own now and going forward. All are rated Buy, and all pay dependable dividends.
This is the 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 8.6 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 bag for first-quarter results, and the Merrill Lynch team said this:
On a consolidated basis, first quarter revenue, EBITDA, and earnings per share 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 definitional changes, AT&T’s implied capex guidance is $20 billion and not $22 billion where the Street consensus is today.
Investors in AT&T are paid a massive 6.6% dividend. The Merrill Lynch price target for the shares is $37, and the Wall Street consensus target is lower at $33.88. The shares ended trading on Friday at $30.59, down over 4% on the day.
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. It 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 will be accretive as well.
American Electric Power shareholders are paid a solid 3.13% dividend. Merrill Lynch has a price target of $93, while the posted consensus target was last seen at $84.19. The shares closed trading on Friday at $86.12 apiece.