4 Conservative Merrill Lynch US 1 Stock Picks That Pay Reliable Dividends

September 25, 2019 by Lee Jackson

You can sense that the market is getting nervous. Technicians are noting the failure to break out to new highs, in addition to the fact that we are in the seasonally scary September to October time frame. With money still pouring into the U.S. Treasury market, yields continue to slide. While that’s great if you’re buying a house, it’s pretty rough for conservative savers looking for certificates of deposit and savings accounts with yield.

Given the selling that is coming in this week, we decided to screen the Merrill Lynch US 1 list looking for the safer picks that also pay solid dividends. We found four that look like extremely good ideas for nervous investors now.

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BlackRock

Many on Wall Street love this firm’s growth potential near term and especially long term. BlackRock Inc. (NYSE: BLK) is the largest asset manager in the world, with more than $5 trillion in assets under management. Its acquisitions of Merrill Lynch Investment Management and iShares transformed it from a fixed income manager into a multiproduct and multichannel giant, with roughly 40% of its assets under management overseas. It has leading franchises in exchange-traded funds (ETFs), institutional fixed income, alternatives and cash. It also operates Solutions, a leader in risk analytics.

The company’s strong historical and prospective dividend growth is underpinned by the high-quality and diversified business model. Dividends have increased 18% annually over the past 10 years. Dividend growth likely will moderate but remains solid in the low teens, consistent with expectations for earnings growth in the years ahead.

Management has been able to drive 7.2% organic growth year to date. The company had record-breaking fixed income flows in the second quarter, and top analysts expect that momentum to continue into the third quarter. Shares trade at more than 14 times 2020 estimated EPS, and that is very attractive.

Shareholders receive a 3.00% dividend. The Merrill price objective for the shares is $537, while the Wall Street consensus target is $524.46. The stock closed Tuesday’s trading at $442.12 a share.

Disney

This top consumer media company has multiple streams of income to push revenue. Walt Disney Co. (NYSE: DIS) stock continues outperforming on a near-term and long-term basis. With the movie studio business poised to improve, as with accelerating theme park business, the network programming continues to drive viewership with extensive sports programming.

The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels, and ABC Family, as well as UTV/Bindass and Hungama. This segment also owns eight domestic television stations.

Families have been flocking this summer to the company’s theme parks such as Disneyland, Walt Disney World in Orlando, Magic Kingdom Park, Epcot, and also the international park. Despite the company reporting weak second-quarter results, the analysts remain positive on the shares.

Disney offers shareholders a 1.33% dividend. Merrill has a $148 price target, but the consensus price objective is $151.43. The shares closed at $131.97 on Tuesday.

Merck

This remains a leading health care stock pick for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular issues, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, male pattern hair loss and fertility diseases.

The company also provides neuromuscular blocking agents for use in surgery, anti-bacterial products for skin and skin structure infections, cholesterol modifying medicines, non-sedating antihistamine and vaginal contraceptive products.

Merck shareholders receive a 2.63% dividend. The $88 Merrill price target compares with the $83.02 consensus target and the most recent close at $83.60 a share.

Procter & Gamble

The company offers a very solid dividend and safety, and the stock is on the Merrill US 1 list. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies, and it operates in five segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby & Family Care. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.

The company actually is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends.

Shareholders receive a 2.41% dividend. Merrill Lynch has set a $110 price objective. The posted consensus target price is $97.38, and shares closed Tuesday at $123.61.

These four outstanding ideas from the US 1 team at Merrill Lynch are decidedly more conservative than most of the list’s holdings. Given their strong and consistent dividends, they offer investors excellent total return potential and a safer way to play the stock market the rest of 2019 and into next year.

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