5 Dividend Aristocrat Stocks to Buy Now as Rates Plunge to Record Lows

Investing

Published: August 29, 2019 6:35 am

Last Updated: January 30, 2020 4:50 pm

Every single day they seem to go lower, and with a large amount of foreign sovereign debt trading at negative interest rates, you can bet U.S. Treasury rates will keep heading south as buyers continue to show up. For people looking to buy a house, a car or any large durable goods item, lower rates are awesome. However, for those who need streams of dependable income, they are somewhat unwelcome.

The 2019 S&P 500 Dividend Aristocrats list is 57 companies that have increased dividends for 25 years straight. Keep in mind that just because they are on this list now doesn’t mean in the future they won’t be forced to reduce their dividends. With that noted, we screened the list for stocks rated Buy in the Merrill Lynch research universe and found five that looked solid and safe values for nervous investors.

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AT&T

This is the telecom component on the Merrill Lynch US 1 list. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV. The company has 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.

The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. With shares 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.

AT&T reported solid operating results in the second quarter, including consolidated revenue growth, expanding operating income margin and record operating and free cash flow. AT&T’s consolidated revenues for the second quarter totaled $45.0 billion, up 15.3% from a year ago, primarily due to the Time Warner acquisition.

Declines in revenues from legacy wireline services, Vrio, domestic video and wireless equipment were more than offset by the addition of WarnerMedia and growth in domestic wireless services, strategic and managed business services, IP broadband and Xandr.

AT&T shareholders receive a rich 5.84% dividend. Merrill Lynch has a $37 price target on the shares, and the Wall Street consensus target is $34.42. The shares closed trading on Wednesday at $34.96.

Caterpillar

This large-cap leader has been hit by trade worries and is offering a very solid entry point. Caterpillar Inc. (NYSE: CAT) is the largest manufacturer and marketer of construction equipment worldwide, and it is also a leading manufacturer of diesel engines and turbines for transport and industrial applications.

The company posted poor second-quarter results, but the long-term story is intact and the Merrill Lynch analysts said this:

Bull/bear debate likely rages on as 2019 outlook hinges on an improvement in fourth quarter, and working down dealer inventories. At the end of the day, consensus likely moves to bottom end of the range and we see levers to drive EPS growth through 2020 and 2021 estimated numbers. The company’s commitment to dividend growth provides investors a yield while central banks ease and recession risks fade over time.

This is one of the companies with the most corporate debt.

Shareholders receive a respectable 3.60% dividend. Merrill Lynch has a $150 price target, and the consensus target is $116.26. The shares closed at $114.86 on Wednesday.

Consolidated Edison

This old-school stock offers investors the stability and track record many seek now. Consolidated Edison Inc. (NYSE: ED) offers electric services to approximately 3.5 million customers in New York City and Westchester County; gas to around 1.1 million customers in Manhattan, the Bronx and parts of Queens and Westchester County; and steam to about 1,700 customers in parts of Manhattan.