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.
AEP shareholders receive a 3.00% dividend. Merrill has set a $93 price target. The consensus target is $88.31, and shares closed at $88.50.
This solid telecom play for nervous investors resides on the Merrill Lynch US 1 List. AT&T Inc. (NYSE: T) is the largest U.S. telecom company. It provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections with 77 million post-paid subscribers. AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition. Through its Warner Media unit, AT&T operates a diversified media and entertainment business.
The company 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 Merrill 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 definitional changes, AT&T’s implied capex guidance is $20 billion and not $22 billion where the Street consensus is today.
Investors receive a 6.6% dividend. The Merrill price target for the shares is $37, and the Wall Street consensus target is $33.88. Shares ended trading on Wednesday at $32.53.
This top Wall Street energy pick has been under pressure as oil prices have dropped dramatically. 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.
Exxon 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 has raised 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. Earlier this spring the company raised its dividend from $0.82 to $0.87 per share. Note that Exxon has one of the highest paid American CEOs.
The dividend yield is 4.56% after the increase. The Merrill price objective is a strong $100. The consensus target is much lower at $85.19, and the stock closed at $76.60.
These five stocks offer investors a degree of safety in a market that appears to be teetering. In addition, they pay consistent and dependable dividends, and they will be around long after the current issues are forgotten and new ones are being considered.
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