This article was originally published on this site
Long-time stock market participants can feel it, and despite the many bullish pundits on Wall Street, the fact of the matter is the bull market is old and getting tired. Many portfolio managers and hedge funds are chasing the same small group of stocks pushing them higher, and while the overall market tends to go in the same direction, by almost every measure things are expensive. The problem for many is there are really no alternatives, especially for total return.
We decided to revisit one our favorite group of stocks at 24/7 Wall St.: the dividend aristocrats. The 2017 S&P 500 Dividend Aristocrats list is 51 companies that have increased dividends (not just remained the same) for 25 years straight. Keep in mind, just because they are on this list now doesn’t mean in the future they won’t be forced to reduce their dividend. We screened the list for stocks rated Buy in the Merrill Lynch research universe and found five that looked solid and safe for nervous investors.
This top Wall Street energy pick is still down over 15% in 2017. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
For 75 years in a row, Exxon has raised its dividend on a split-adjusted basis. Thanks to the company’s vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.
Exxon shareholders are paid a 3.72% dividend. The Merrill Lynch price objective for the stock is $90, while the Wall Street consensus target price of $83.93 is closer to Tuesday’s open at about $82.42.
This top Warren Buffet holding not only offers safety but an incredible strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola investors receive a 3.17% dividend. Merrill Lynch has a $52 price target, while the consensus target is $48.11. Shares were last seen trading at $46.80.
This top industrial could really jump with an economic pickup, and only 19% of mutual funds currently hold the stock. 3M Co. (NYSE: MMM) is a diversified, global manufacturer. Its businesses are technology-driven and organized under five segments: Consumer, Safety and Graphics, Electronics and Energy, Healthcare, and Industrial. Its popular brands include Scotch, Post-It, 3M and Thinsulate. The company also holds over 500 U.S. patents.
The company announced in October that it has completed its acquisition of Scott Safety from Johnson Controls for a total enterprise value of $2.0 billion. Scott Safety is a premier manufacturer of innovative products, including self-contained breathing apparatus (SCBA) systems, gas and flame detection instruments, and other safety devices that complement 3M’s personal safety portfolio.
3M’s Personal Safety Division provides respiratory, hearing and fall protection solutions that help improve the safety and health of workers. The business also supplies products and solutions in other safety categories, such as head, eye and face protection, as well as reflective materials for high-visibility apparel and protective clothing.
Shareholders are paid a 2.06% dividend. The $257 Merrill Lynch price target compares with the consensus target of $224.62. The stock traded Tuesday morning at $227.50.
Procter & Gamble
This stock also offers a very solid dividend and safety. Procter & Gamble Co. (NYSE: PG) is another solid consumer staples stock for conservative investors to consider. It sells lots of very well-known household items that are essential for everyday life. Brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.
P&G 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. While currency headwinds have weighed on earnings and projections, a weaker dollar scenario would bode well for the future. The analysts noted this when the company reported third-quarter results:
The company reported roughly in-line results despite challenges in the quarter with a slight operating profit miss offset by below-the-line items. We maintain our fiscal year 2018 estimated EPS of $4.16 vs management’s unchanged guidance of +5-7% (implies $4.12-4.19) on organic sales of approx +2%.
Shareholders receive a 3.1% dividend. Merrill Lynch has set its price objective at $100, and the consensus target is $92.32. The stock was trading at $88.55.
The giant retailer’s stock has performed well since bouncing off lows for the year way back in January, and it is on the Merrill Lynch US 1 list. Wal-Mart Stores Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores in various formats, including Sam’s Club, in the United States as well as a growing e-commerce business (including Jet.com). Internationally Walmart also operates locations in Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.
Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. With fiscal year 2016 revenue of $482.1 billion, Walmart employs approximately 2.2 million associates worldwide.
The company recently announced a massive $20 billion stock repurchase plan that was met with open arms by Wall Street. Many think it is in an effort to ward off potential activist investors. Most shareholders could care less and are thrilled by the buyback.
Walmart shareholders are paid a 2.24% dividend. The Merrill Lynch price target is $100. The posted consensus target is $85.49, and the shares at $90.95 Tuesday morning.
Despite the constant Wall Street bullishness, the market needs a breather, and a 5% sell-off would provide just that. These five top stocks rated Buy all pay good dividends and raise them every year. They also offer a degree of safety in what is clearly a very expensive market by historical standards. With the markets grinding higher and getting more expensive, playing it safe makes sense now.