The Dow Jones industrial average is down a stunning 3,200 points this week, and we have given back almost five months worth of gains in six trading sessions. The adage of “the market goes up like an escalator, but down like an elevator” has never been more spot on. Given the drastic drop and increased volatility, in addition to the coronavirus concerns that could put a serious crimp in growth, it is very possible that the Federal Reserve lowers interest rates when it next meets on March 17 and 18.
With the potential for rates to come down, we decided to screen the Merrill Lynch research universe looking for safe companies that pay dividends, have shares that are rated Buy, and tend to do well when the federal funds rate is cut and goes lower. These five make good sense for worried investors now.
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Agnico Eagle Mines
This is one of Wall Street’s most preferred North American gold producers. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden.
The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983. With gold pushing toward highs not seen in years, the company could be poised for big-time earnings this year.
In addition, the company’s Meadowbank complex in Nunavutis is expected to achieve commercial production very soon, and the Amaruq project was expected to ramp up to full production by late last year. Amaruq’s gold output is forecast to rise from 130,000 ounces in 2019 to 351,000 ounces in 2021, and it could account for 17% of Agnico Eagle’s total output.
Shareholders receive just a 0.86% dividend. The Merrill Lynch price target for the shares is $74, and the Wall Street consensus target is $70.39. Agnico Eagle Mines stock closed Thursday’s trading at $49.40 a share, down just over 3% on the day.
American Electric Power
This is one of the largest public utilities in the United States and is on the Merrill Lynch US 1 list of top stock picks. 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.
The company 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.
Wall Street analysts have been raising their AEP price targets recently, and the stock was considered a good one for retiring baby boomers.
The utility pays shareholders a solid 2.80% dividend. The analysts at Merrill Lynch have set a $110 price target, while the posted consensus price target was last seen at $105. American Electric Power stock closed at $91.86 per share, down almost 6% on Thursday.
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