With earnings for the second quarter all but over, and the third quarter of 2019 well underway, many of the top firms we follow on Wall Street are making some changes to the curated lists of stock picks for clients. With the market showing volatility not seen in years, it makes sense to examine the lists and make some changes, as the rest of the year could have additional volatility as the political and geopolitical cycle could prove to be very explosive component.
We regularly watch the Merrill Lynch High Quality & Dividend Yield List of top dividend stock recommendations for changes, and while nothing new was added this week, we did note that the list leans to the more conservative side, and with good reason. Many investors, both large and small, have been selling market strength, so it makes sense to look for low volatility and reliable dividends.
These five stocks on the High Quality & Dividend Yield list offer a higher degree of safety and reliable dividends. Merrill Lynch rates them all as Buy.
Regardless of interest rate decisions and trade wars, people have to eat, and this company has consistently delivered the goods. Darden Restaurants Inc. (NYSE: DRI) is a casual-dining restaurant portfolio company. Its approximately 1,700 restaurants are 100% company-owned and include two large brands: 850 Olive Garden restaurants and 500 LongHorn Steakhouse units. The company’s smaller brands include Cheddar’s Scratch Kitchen, Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s and Yard House.
The company’s ability to protect margins while driving a strong top line is a sharp contrast to casual dining peers that often struggle to get flow-through in a tough cost backdrop. The Merrill analysts think Darden is well-positioned for an industry shift toward scale, which they think shows up in its capabilities around data analytics and customer insights.
Shareholders receive a 2.89% dividend. Merrill’s price target for the stock is $130, and the Wall Street consensus target is $127.08. The stock ended trading at $121.84 on Thursday.
This top stock has been hit hard and offers a tremendous entry point for investors. Emerson Electric Co. (NYSE: EMR) is a global technology and engineering company providing innovative solutions for customers in industrial, commercial and residential markets.
The company’s Automation Solutions business helps process, hybrid and discrete manufacturers maximize production, protect personnel and the environment while optimizing their energy and operating costs. The Commercial & Residential Solutions business helps ensure human comfort and health, protect food quality and safety, advance energy efficiency and create a sustainable infrastructure.
Shareholders receive a 3.31% dividend. Merrill has set a $76 price target, while the consensus figure is $72. Shares closed most recently at $59.14.
This self-storage leader always has been a go-to real estate investment trust for investors. Public Storage Inc. (NYSE: PSA) is a fully integrated, self-administered and self-managed REIT that primarily acquires, develops, owns and operates self-storage facilities.
As of March 31, 2019, PSA had interests in 2,444 self-storage facilities located in 38 states, with approximately 164 million net rentable square feet in the United States and 35% equity interest in Shurgard, which owned 231 storage facilities located in seven Western European nations, with approximately 13 million net rentable square feet.
Investors receive a 3.05% distribution. The $267 Merrill price target compares with the $237.27 consensus target. The shares closed way above that level on Thursday at $262.24.
This company has a diversified mix of business and remains a favorite at Merrill Lynch. Raytheon Co. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services. The company operates in four principal business segments: Integrated Defense Systems, Intelligence, Information and Services, Missile Systems, and Space and Airborne Systems. It is among the companies that make the most from the U.S. government.
On June 9, United Technologies and Raytheon agreed to merge their businesses to create a new aerospace and defense powerhouse. The two companies have received unanimous approval from their respective boards. The new company will be called Raytheon Technologies.
The dividend yield is 2.06%. Merrill price objective is $265. The consensus target is $208, and shares closed at $182.73.
This top consumer apparel company posted outstanding results. V.F. Corp. (NYSE: VFC) is a leading apparel wholesaler of lifestyle brands, including North Face, Vans, Wrangler, Lee, Timberland and Nautica. VFC distributes products globally via department stores, independent retailers, specialty chains and its own retail (full price, outlet and e-commerce).
Coalition segments include Outdoor and Action Sports (68% of fiscal 2018 revenue), Jeanswear (21% of revenue), and Workwear/Imagewear (9% of revenue). The company has reported solid results this year, and it recently spun off its Kontoor Brands to pay down debt.
Shareholders receive a 2.06% dividend. Merrill has a $100 price objective. The consensus figure is $95.10, and shares closed at $83.30.
Outstanding metrics and good dividends mean these quality companies make good sense for conservative growth portfolios. With solid total return potential and less chance for volatility, they all are outstanding long-term portfolio additions.