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4 Merrill Lynch Top-Yielding Dividend Stocks to Buy for Q4

Most investors have had a rough 2015, and with the Nasdaq the only index that is up for the year as of Friday, the question is what’s the game plan for the rest of the year? While the markets have made some solid moves as we end up October, investors must wonder how will the rest of the year play out.

With many fearful of a toppy stock market, and the odds looking like the earliest the Federal Reserve will raise rates is December, the best way for investors to go may be the safe way: buy solid growth stocks that pay big dividends. We screened the Merrill Lynch research universe for high-yielding stocks that are rated Buy. These are the kind of investments that growth investors can make to run out the clock on 2015.

AT&T

This company posted very solid third-quarter numbers, and many on Wall Street think the fourth quarter will be good as well. AT&T Inc. (NYSE: T) is clearly one of the most ignored dividend plays on Wall Street. In fact, it continues to be one of the most underowned securities by active fund managers, according to Wall Street data. Trading at a very cheap 12.07 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans, an area that many on Wall Street believe could lead to some earnings weakness.

AT&T posted outstanding third-quarter results recently and reiterated 2015 guidance for double-digit revenue growth and continued consolidated margin expansion. Management expects capital spending to increase sequentially, and they also estimate that free cash flow could be better than $4.5 billion. Third-quarter wireless subscriber additions came in higher than many Wall Street estimates, and DirecTV saw positive video additions where many expected losses.

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AT&T investors receive an outstanding 5.57% dividend. The Merrill Lynch price target is$40, and the Thomson/First Call consensus estimate is $37.04. Shares closed Friday at $33.74.

Altria

The maker of tobacco products and wine has posted very solid numbers through the first half of the year, and the third quarter is looking good as well. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world.

Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate. Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb, and strong share repurchase activity.

Altria recently reaffirmed its full-year adjusted earnings per share outlook, and the company is expected to report third-quarter numbers this week.

Altria investors receive an outstanding 3.85% dividend. Merrill Lynch has a $64 price target. The consensus estimate is $60.63. The stock closed Friday at $61.05.

ConocoPhillips

This may offer investors some of the best total return possibilities, and the Merrill Lynch analysts see it as a top yield play. They also recently added the company to the firm’s US1 list. ConocoPhillips (NYSE: COP) is a large integrated that has spent the past five years divesting assets. Although it is cash rich, it has somewhat dampened earnings and growth expectations all year long. With oil still looking for a bottom, and the market watching events in the Middle East, many analysts may feel more comfortable with the stock.

Merrill Lynch feels Conoco can accelerate growth from reloaded portfolio depth in the Bakken and Eagle Ford with visibility on future growth from a newly disclosed sizable position in the Permian. Analysts are cautious but positive on the company’s earnings report, due this week. Solid cuts in unnecessary spending and the possibility of increased sales of non-core assets remain ongoing positives.

Investors are paid a very strong 5.42% dividend. The $77 Merrill Lynch price target is well above the consensus target of $62.23. Conoco closed Friday at $54.61.

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Pfizer

This stock that could be offering investors the best value at current trading levels. Pfizer Inc. (NYSE: PFE) increased its product line earlier this year with a gigantic $15.2 billion purchase of Hospira, a top provider of sterile injectable drugs, infusion technologies and biosimilars.

The company’s drug Ibrance was approved for advanced breast cancer by U.S. regulators earlier this year, more than two months ahead of schedule, letting the drugmaker proceed with one of its most promising new blockbusters, a turn of events that Wall Street likes. With a strong pipeline, and the fact that Pfizer is the world’s largest drug manufacturer by sales volume, many analysts feel it can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years, with Ibrance leading the way.

The company has announced that it is starting 20 clinical trials this year, and more soon thereafter, on treatments to conquer cancer as it also seeks to gain leadership in one of the hottest and most lucrative areas of medicine. Pfizer currently has eight approved cancer medicines, four of them launched in the past four years. It is running late-stage patient tests on five of those drugs for additional uses and has three other drugs in late-stage testing, which is usually the last round before seeking regulatory’ approval. In addition, the company has 14 other drug programs in early stages.

Pfizer investors receive a tidy 3.3% dividend. The Merrill Lynch price target is $38, but the consensus target is higher at $39.89. Pfizer closed Friday at $34.05.

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Solid growth stocks that pay good dividends make sense, especially when they all have higher yields than the current 30-year U.S. Treasury bond. Investors looking for growth and income can do very well owning these top companies.

 

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