[cnxvideo id=”625457″ placement=”ros”]When sellers consistently hit bids in a market that trends higher, you actually get two winners. The sellers, of course, who are selling into strength, and the bids for them are reasonably abundant and liquid, but there is another winner. For the long-term stock investor, consistent selling is also a contrarian indicator, and despite the S&P 500 creeping back over the 2,100 level for the first time since April, a true wall of worry seems to exist.
In a new research note, which really echoes what they have said for some time now, the Merrill Lynch equity and quantitative strategists note that their clients were sellers of U.S. stocks for the 18th consecutive week, which they say is the longest uninterrupted selling streak in their data history. Institutional clients, along with private clients and hedge funds, were all net sellers.
From a contrarian standpoint that is good as bull markets usually end on massive speculation and froth, and with clients literally selling almost all year, that is hardly speculative or frothy. We screened the Merrill Lynch research universe for safe dividend paying stocks that are rated Buy for investors to consider.
Coca-Cola
This company remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. 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, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, it is the top 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 its beverages at a rate of more than 1.9 billion servings a day.
Despite reporting better than expected first-quarter results, the stock was hit as many portfolio managers were overweight consumer stocks, and the market noted that the company’s multiple had jumped higher than peers. It is important to remember though that the company own 31.5% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola investors receive an outstanding 3.13% dividend. The Merrill Lynch price target for the stock is $52, and the Thomson/First Call consensus price target is $47.50. The stock closed Wednesday at $44.70.
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Kohl’s
This top retailer has been pounded and could be offering investors a solid entry point. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States. It offers private label, exclusive and national brand apparel, footwear, accessories, beauty and home products to children, men and women customers. The company also sells its products online at Kohls.com and through mobile devices. As of March 03, 2015, it operated 1,162 department stores in 49 states.
The company recently got a ton of free social media marketing and advertising when a Texas mom’s crazy internet post wearing a Chewbacca mask that she bought in a bargain bin at the store went incredibly viral. The clip has been seen by 135 million people as of Monday morning, making it the most watched video ever on Facebook. Kohl’s sent representatives to her house with a trove of gift cards and other items, and of course, more Chewbacca masks for the kids. Only 8.8% of funds own the stock.
Kohl’s shareholders are paid a huge 5.55% dividend. Merrill Lynch has a $42 price target for the stock, and the consensus target is posted at $41. The stock closed most recently at $36.17 a share.
Philip Morris
This company has continued to grow global market share and makes good sense for total return investors now. Philip Morris International Inc. (NYSE: PM) is the world’s leading international tobacco company, with six of the world’s top 15 international brands and products sold in more than 180 markets.
In addition to the manufacture and sale of cigarettes, including Marlboro, the number one global cigarette brand, and other tobacco products, the company is also engaged in the development and commercialization of reduced-risk products (RRPs), the term it uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Through multidisciplinary capabilities in product development, state-of-the-art facilities and industry-leading scientific substantiation, Philip Morris aims to provide an RRP portfolio that meets a broad spectrum of adult smoker preferences.
Philip Morris shareholders receive a very solid 4.1% dividend. The $110 Merrill Lynch price target is higher than the consensus target of $103.34. Shares closed on Wednesday at $99.40 apiece.
Verizon Communications
This top telecommunications company is rated Buy at Merrill Lynch. Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world. Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
The company reported in-line first-quarter numbers. It is worth noting that new revenue streams from IoT (Internet of Things) are growing, with revenues of roughly $195 million in first-quarter 2016, a year-over-year increase of about 25%.
There was some chatter recently that the company was enlisting the aid of the firm’s AOL CEO Tim Armstrong to help with a leading role in exploring a possible bid for Yahoo assets. Verizon has not officially started negotiations, and the rumors are just that, but the company has said in the past it was open to acquiring additional assets. The Yahoo book is out, and numerous companies are pouring over it now.
Verizon investors are paid a massive 4.5% dividend. The $55 Merrill Lynch price target compares with the consensus price objective of $52.26 and the most recent closing share price of $50.43.
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Merrill Lynch’s overall bias for the better part of this year has been somewhat bearish, and it’s understandable as markets are probably close to fully valued. Unless earnings jump, there’s not much of a reason for stocks to go dramatically higher. With that in mind, all these companies still look like solid buys for potential increases in volatility.
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