With Treasury yields having plunged to all-time lows, buying government debt now as a safe haven play looks like a losing hand. The incredible bond market rally has fed on itself as the sheer lack of inventory, huge demand and a degree of paranoia have driven prices higher and yields lower, and with the 30-year Treasury yielding 1.21% and the 10-year perched at 0.74%, the risk-reward for most investors is simply not worth it.
While the COVID-19 scare continues to manifest itself into all areas of commerce and life, those who took some profits when the market hit all-time highs in early February may be sitting pretty when it comes to putting a very small amount of that money to work.
We screened the Merrill Lynch research database looking for stocks that were rated Buy, paid dependable dividends and had the firm’s top risk-adjusted rating. We found five that investors may want to buy small entry positions in now.
McDonald’s
The fast-food giant continues to revamp both stores and the menu, and it is a solid pick for conservative accounts. McDonald’s Corp. (NYSE: MCD) is the world’s leading global food-service retailer with over 37,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local businesspersons, and it is one of the most valuable brands in the world.
Fourth-quarter 2019 diluted earnings increased 14% (15% in constant currencies). Included in the results was $84 million ($0.11 per share) of income tax benefit due to new regulations issued in the quarter related to the Tax Act.
Shareholders receive a 2.50% dividend. The Merrill price target for the shares is $240, while the Wall Street consensus target is $229.41. McDonald’s stock closed Tuesday at $199.86 a share, up almost 7% on the day.
NextEra Energy
With a very strong balance sheet, this company looks poised for a solid first half of 2020. NextEra Energy Inc. (NYSE: NEE) consists of two main business segments: the Florida Power & Light (FPL) regulated utility, and NextEra Energy Resources, a deregulated generator of predominantly wind, natural gas, nuclear and solar powered assets in North America. The company also holds a 65.1% share in the yieldco NextEra Energy Partners.
FPL announced last summer a groundbreaking “30-by-30” plan to install more than 30 million solar panels by 2030 and make the state of Florida a world leader in the production of solar energy. It and NextEra Energy Resources are already the world’s largest producers of renewable energy from the wind and sun. When this plan is completed, FPL expects to be the largest utility owner and operator of solar in America.
Investors receive a safe 2.19% dividend. Merrill’s $285 price objective is above the consensus figure of $267.63. NextEra Energy stock closed at $255.73 on Tuesday.
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