Investing

4 Top Dividend Stocks That Should Do Great Regardless of Who Is President

Lee Jackson

Published: August 10, 2016 11:05 am

Last Updated: January 13, 2020 4:43 am

Wall Street is desperately trying to handicap what stocks will do well depending on which presidential candidate wins. A Trump victory would perhaps favor stocks that are helped along by a weaker dollar. Conversely, a Clinton win probably would favor companies that are in renewable energy and similar areas. Regardless of who ultimately wins, rates are going to stay low, possibly for years, so solid big dividend stocks will remain in favor.

We screened the Merrill Lynch research universe looking for companies with at least a 4% dividend yield that should not see their business affected either way by the change in the White House, particularly those rated Buy at Merrill Lynch. We found four that should be just the ticket, regardless of the ticket that wins, that is.

AT&T

This company has had an incredible run this year, and the Merrill Lynch team sees it going even higher. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.

With its shares trading at a very cheap 14.3 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.

The company reported inline numbers for the second quarter, and while the consolidated revenue number was slightly higher than the Merrill Lynch estimate, the EBITDA was slightly below. Company management noted it is on track to meet or exceed current estimates for the year.

Many Wall Street analysts have cited the company’s positive commentary on free cash flow, in addition to improving video/broadband trends later this year, with single truck-roll and new converged offerings expected to be coming in October.

AT&T investors receive a 4.45% dividend. The Merrill Lynch price target for the stock is $46, and the Wall Street consensus target is $42.27. Shares closed Tuesday at $43.08.

FirstEnergy

This is a higher yielding utility stock for accounts needing income. FirstEnergy Corp. (NYSE: FE) is a diversified energy company dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation’s largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. Its transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions.

FirstEnergy is making significant upgrades to the infrastructure of some of its top holdings. Pennsylvania Electric is spending nearly $11 million for infrastructure improvements, which include rehabilitating and replacing power lines and installing remote-controlled devices and more durable protective devices on wires. The improvements are in an effort to help avoid customer disruptions.

Metropolitan Edison Company is starting work on $7 million of similar projects. While Potomac Edison is investing $5 million in building a 14.5-mile power line carrying a capacity of 34.5 kilovolt to minimize the number of affected customers in case of service disruptions. Potomac is also constructing a new substation consisting of three transformers with construction expected to be complete by 2017.

FirstEnergy investors receive a 4.38% dividend. Merrill Lynch has a $38 price target. The consensus target is $36.27. The stock closed Tuesday at $36.84.
General Motors

This company is in the automobile sector, and shares look to be very inexpensive at current levels. Despite all the recall troubles and litigation issues, hedge funds and mutual funds are continuing to stick with General Motors Co. (NYSE: GM), as many view the stock as very undervalued. GM trades just below an incredible 5.67 times estimated 2016 earnings. The company, like competitor Ford, has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago, and it grabbed a big chunk of what is now the world’s largest auto market.

Long-term patient investors that can look beyond current issues may stand to make outstanding money on the auto giant, especially as low gasoline prices continue to push new buyers into showrooms. The stock was hit hard recently as Ford missed estimates and much of the blame was placed on incentives, which have been much lower at GM

The company recently reported very solid second-quarter earnings, and with gas prices staying at the lowest levels in years, and GM producing some of the best new models in years, the future for the battered stock looks very good. The analysts also feel the company is well prepared for the next downturn.

GM investors receive an outstanding 4.9% dividend. The $42 Merrill Lynch price target compares with the consensus target of $36.69 and Tuesday’s closing price of $31.07.

Philip Morris International

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.

The company reported earnings slightly below estimates, but the full-year underlying guidance remains the same. The analysts expect the second half of the year, especially the fourth quarter, to be very solid.

Shareholders are paid a 4.15% dividend. Merrill Lynch has a $115 price target, and the consensus target is $105.46. Shares closed on Tuesday at $98.40.

While there is no guarantee that these stocks all thrive after the November election, they all have very strong and mature franchises that should continue to drive earnings regardless of who sits in the Oval Office starting in 2017.