The top firms on Wall Street for some time have stressed quality yield and dividend growth stocks over pure high-dividend stocks. The stocks that consistently grow their dividends are usually consistently growing earnings. The analysts at Merrill Lynch screen all of the stocks in their coverage looking for quality names that will have consistent dividend growth.

The Merrill Lynch team screens for names that meet very strict criteria. Stocks on their high-quality and dividend yield list have to have the following qualities:

1. S&P common stock rank of A+, A or A-. The S&P common stock rankings are their main measure of quality. These rankings are based primarily on the growth and stability of earnings and dividends over a 10-year period.
2. Return on equity (ROE) greater than that of the S&P 500 ROE.
3. Debt-to-equity ratio lower than that of the S&P 500.
4. Dividend yield greater than that of the S&P 500.
5. Merrill Lynch opinion indicates Buy or Neutral, as well as the likelihood that the dividend will remain the same or be increased.
6. The ratio of the past 12-months’ free cash flow to dividends must be greater than 1.0.

We have screened their list to pick out only the Buy-rated stocks.

Automatic Data Processing Inc. (NYSE: ADP) kicks off the Merrill Lynch list. The company provides technology-based outsourcing solutions to employers and vehicle retailers and manufacturers worldwide. The company operates in three segments: Employer Services, Professional Employer Organization (PEO) Services and Dealer Services. The company also provides Wall Street valuable employment data. Investors are paid a 2.4% dividend. The Merrill Lynch price target is $88. The Thomson/First Call estimate is much lower at $78. ADP closed Friday at $77.02.

CSX Corp. (NYSE: CSX) is a top transportation name to make the grade. The major headwind for CSX is the deteriorating coal sector. Energy markets continue increasingly to favor natural gas. To combat the decline, CSX sees the merchandise and intermodal businesses as a counterbalance for continued growth. At the Baird Industrials Conference in Chicago last month, CFO Fredrik Eliasson noted that these two businesses now make up more than 80% of CSX’s total volume. He said customers see the “attractive economic value of converting freight from highway to rail.” Investors are paid a 2.2% dividend. The Merrill Lynch price target is $29, the same as the consensus target. CSX closed Friday at $27.57.

McDonald’s Corp. (NYSE: MCD) is a top consumer discretionary name to make the list. The fast-food giant just reported a nearly 1% dip in sales for the month of November. That follows a disappointing October, when the introduction of Mighty Wings and a new flavored coffee failed to jump-start revenue in the United States. The long-term stability of the name is a good reason to make it a long-term portfolio holding. Investors are served a tasty 3.4% dividend. The Merrill Lynch price target is posted at $110. The consensus figure is at $104.50, and McDonald’s closed Friday at $94.44.

3M Company (NYSE: MMM) is a quality industrial name on the Merrill Lynch list of stocks to buy. The company received a big upgrade last week from the analysts at Nomura. The stock responded accordingly. Nomura now expects 3M to post EPS of $6.75 in 2013 and $7.50 in 2014. Very strong earnings growth should continue to drive the share price. Investors are paid a 2% dividend. Merrill Lynch has a $141 price objective, and the consensus number is set lower at $126. 3M closed Friday at $126.43.

Procter & Gamble Co. (NYSE: PG) is a solid consumer staples name on the list. The company sells lots of run-of-the-mill household items that are essential for everyday life and is not content to stand pat on its laurels. 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. Shareholders are paid a 2.9% dividend. Merrill Lynch has an $87 price target, and the consensus is posted a touch higher at $88. P&G closed Friday at $82.37.

United Technologies Corp. (NYSE: UTX) is a top industrial name on the list. United Technologies provides high technology products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems, Pratt & Whitney and Sikorsky. Investors receive a 2.1% dividend. The Merrill Lynch target for the stock is posted at $120, and the consensus figure also is $120. United Technologies closed Friday at $107.35.

Wal-Mart Stores Inc. (NYSE: WMT) is a top retail name to buy at Merrill Lynch. Despite the early worries about a shortened holiday selling season, the conventional wisdom now is that the season will be better than early predictions. Walmart’s low-price pitch continues to resonate with American consumers hit hard in the recession. Investors are paid a 2.4% dividend. The Merrill Lynch price target for the stock is $90, while the consensus figure is set at $84.50. Walmart closed Friday at $78.08.

None of these names will end up on any momentum list of super-hot stocks to buy. What they provide investors is a portfolio that one can sleep well with at night. The end game in investing is total return. Solid dividend growth stocks are the way for investors to post solid long-term gains.

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