Investing
Merrill Lynch Has 4 Blue-Chip Dividend Stocks to Buy and Hold Forever
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The more investment experience you have, the more you want to stick with companies that have shown the ability to stay relevant while still generating dividends and dividend growth. Many top strategists on Wall Street feel that, after lagging in 2015, dividend stocks are poised to rebound in 2016 as the Federal Reserve finally starts the long anticipated interest rate increases and the headline risk goes away.
Given that the chances for dividend stocks to rebound do look solid, we screened the Merrill Lynch research universe database for blue chip stocks with good dividends that investors can not only buy for 2016, but can hold indefinitely, as they have shown over the years staying power and a long history of dividend increases. We found four, which are all rated Buy.
Altria
The maker of tobacco products and wine has posted very solid numbers through the first three quarters of 2015, and the fourth quarter should be solid 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 analysts expect support of the strong dividend, which they believe will continue to climb, as well as strong share repurchase activity.
Altria reported adjusted earnings per share for the third quarter of 2015 that were in line with the Wall Street estimates but exceeded the prior-year quarter figure by 8.7%, backed by strong performance of the core tobacco business and the leading premium brands. To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories, like wine, e-cigarettes and a 27% stake in brewer SABMiller, which together generated nearly 10% of its pre-excise tax revenue last quarter. With SABMiller being acquired, Altria will have a huge stake in the world’s biggest beer company.
Altria investors receive a solid 3.96% dividend. The Merrill Lynch price target for the stock is $66, and the Thomson/First Call consensus price target is $64. The stock closed Friday at $58.51.
This company may offer investors some of the best total return possibilities, and Merrill Lynch sees it as a top yield play and recently added it to the firm’s US 1 list. ConocoPhillips (NYSE: COP) is a large integrated that has spent the past five years divesting assets. Although it is cash rich, the company 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.
Many Wall Street analysts feel 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. They are cautious but positive on the company’s impending earnings report. While Conoco reported a third-quarter loss, the largest U.S. independent oil company lowered its 2015 spending target in response to the lingering slump in crude prices. Solid cuts in unnecessary spending and the possibility of increased sales of noncore assets remain ongoing positives.
Investors receive a very strong 5.78% dividend. The Merrill Lynch price target is a whopping $77. The consensus target is much lower at $62.47. Conoco closed out Friday at $51.19.
Dominion Resources
Many of the Wall Street firms that we cover are becoming more positive on utilities again after this year’s underperformance. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. It operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and serves utility and retail energy customers in 13 states.
Dominion operates via three divisions. Dominion Virginia Power is focused on regulated electric transmission and distribution that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina. Dominion Generation generates electricity through coal, nuclear, gas, oil, hydro and renewable sources. Dominion Energy centers around regulated natural gas distribution and storage.
Dominion investors receive a solid 3.9% dividend. The Merrill Lynch price target is $80 and the consensus estimate is $78.39. The stock closed Friday at $66.60.
Pfizer
This one could be offering investors the best value at current trading levels. Pfizer Inc. (NYSE: PFE) has a very strong pipeline, and being the world’s largest drug manufacturer by sales value supports the Wall Street notion that it can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years.
Pfizer announced recently details of what would be one of this year’s biggest deals, a $160 billion merger with Allergan. Though specifics are still emerging, at current announced levels the purchase would be the largest 2015 acquisition. However, the Treasury Department has said that it is working on new rules for corporate tax inversions, which is potentially what the Pfizer/Allergan deal would be and could possibly throw wrench into the negotiations.
Pfizer has announced that it is starting 20 clinical trials this year and more soon after 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 3.41% dividend. The $39 Merrill Lynch price target is lower than the consensus target of $40.47. Pfizer closed Friday at $32.80.
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