It seems almost incredible that it takes a month-long rally just to get the markets back to breakeven for the year, but that’s exactly what it has taken. With earnings season ready to fire up, and stocks getting pricey, many investors are trying to make a decision on which way to steer their portfolios, not only for the second quarter, but for the rest of 2016.

One good way to invest is to consider the stocks in the Merrill Lynch High Quality and Dividend Yield screen. The portfolio contains stocks with solid return on equity greater than the aggregate of the S&P 500, lower debt to equity than the S&P 500, a dividend yield higher than the overall S&P 500 and S&P common stock rating of at least A-.

Merrill Lynch has added one new company to the list, and we also screened for the three highest yielding stocks in the group. All are rated Buy at Merrill Lynch.

Raytheon

This company has a diversified mix of business, posted solid fourth-quarter numbers and is the newest addition to the High Quality and Dividend Yield screen. Raytheon Corp. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services.

Raytheon is not only likely to benefit from domestic defense purchasing, but it has posted large contract sales to the Saudis over the past two years. Last year Raytheon purchased privately held cybersecurity company Blackbird Technologies for about $420 million. The acquisition will help expand its surveillance and cybersecurity services. Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services.

Raytheon investors receive a 2.36% dividend. The Merrill Lynch price target for the stock is $150, and the Thomson/First Call consensus target is $140.19. The shares closed Monday at $124.22.

Procter & Gamble

This stock is trading at the same level it was this time last year, in part because the company has a very large 65% of sales directed to foreign customers. That should improve as the dollar’s run looks to be slowing. Procter & Gamble Co. (NYSE: PG) is a solid consumer staples stock especially for conservative investors to consider. The company sells lots of run-of-the-mill household items that are essential for everyday life, and it is not content to rest on its laurels.

The company 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 recent earnings and projections, the dollar may be topping out this fall, and that would bode well for the future.

The company posted very solid fourth-quarter results in January and, despite earning expectations that have been lowered somewhat, Merrill Lynch feels comfortable that the stock can continue the current positive momentum.

Shareholders receive a 3.19% dividend. Merrill Lynch has as $89 price target, and the consensus target is $83.20. Shares closed Monday at $83.21.
Target

This top retailer is on the screen and could be one of the beneficiaries of much lower gasoline prices. Target Corp. (NYSE: TGT) operates as a general merchandise retailer in the United States. It offers household essentials, including pharmacy, personal care, baby care, cleaning and paper products; music, movies, books, sporting goods and toys; electronics, such as video game hardware and software; and apparel for women, men, boys, girls, toddlers and newborns, as well as intimate apparel, jewelry, accessories and shoes. Target also provides food and pet supplies, home furnishings and décor, automotive products and seasonal merchandise.

The company shut down all its Canadian locations back in May of last year, putting about 17,600 employees out of work. While difficult, it closes a very unprofitable and ill-fated chapter, and it helps the company to move forward and concentrate on the very profitable U.S. business. Target has increased the focus on online sales, which currently totals right about 3% of total sales.

With its solid earnings, many Wall Street firms raised estimates as it appears some of Target’s strength is coming at the expense of the company’s big-box competitor Wal-Mart. With job growth and low fuel prices, consumer purchasing should continue to grow.

Target shareholders receive a 2.72% dividend. The $95 Merrill Lynch price objective is higher than the consensus target of $83.45. Shares closed Monday at $82.30.

Qualcomm

This top technology stock has totally underperformed this year and also resides on the Merrill Lynch US 1 list. Qualcomm Inc. (NASDAQ: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. It includes Qualcomm’s licensing business, QTL, and the vast majority of its patent portfolio.

Qualcomm Technologies, a subsidiary of Qualcomm, operates, along with its subsidiaries, substantially all of Qualcomm’s engineering, research and development functions, and substantially all of its products and services businesses, including its semiconductor business, QCT. The company recently settled with the SEC over the hiring of relatives of Chinese officials, which has removed an overhang on the stock.

The growth of 3G mobile technologies in emerging markets, like China and India, has had a positive impact on Qualcomm and could be a difference maker going forward. Qualcomm is and has been for years a market leader in the development of 3G CDMA (Code Division Multiple Access) technologies. The company recently developed an LTE chipset that supports SCDMA (Synchronous Code Division Multiple Access) technology. China’s mobile network runs on this, and it could provide the company with a huge leg up in years to come.

The company recently announced a joint venture with Japan’s TDK company that will enable delivery of radio frequency (RF) front-end modules and RF filters to fully integrate systems for mobile devices and other fast-growing business segments. According to Qualcomm, this space is projected to be an $18 billion market by 2020.

Investors are paid a 3.79% dividend. The Merrill Lynch price target is $75. The consensus target is $56.75. Shares closed Monday at $50.65.

With outstanding metrics and good dividends these quality companies make good sense for conservative growth portfolios. With solid total return potential, and less potential for volatility, they are outstanding long-term portfolio additions.

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