[cnxvideo id=”655412″ placement=”ros”]It’s always disappointing for investors when they look at their statements from the brokerage firms and notice that while their funds are up, they are underperforming the benchmark. For most large cap managers the benchmark is the S&P 500, and this year, according to Merrill Lynch, 58% of managers beat the benchmark in August, only a small 15% are outperforming year to date and that is the worst year in history.
The solution for many accounts is to buy and hold top dividend leading stocks, and in some cases, when they get a touch pricey writing covered calls on the stock to add some more total return in the event of a market pullback. We screened the Merrill Lynch research universe for stocks that were rated Buy and that were also members of the Dividend Aristocrats.
These stocks are members of the S&P 500 and have increased their dividend for at least 20 consecutive years, We found four that investors can buy now and hold forever.
Abbott Laboratories
Shares of this top pharmaceutical stock with very solid growth potential are down over 15% from highs hit last summer. Abbott Laboratories (NYSE: ABT) is a leading diversified global health care company that develops, manufactures and markets branded generics, medical devices, nutritional products and diagnostic solutions. It offers a diversified large cap play as earnings are split between five well-positioned business segments.
The company recently agreed to acquire the equity in Minnesota-based Tendyne Holdings that it does not already own for $250 million plus future payments tied to regulatory milestones. Wall Street likes the purchase and the way the company is putting its substantial balance sheet to work.
Merrill Lynch noted earlier in the summer that CEO Miles White bought a stunning $45 million worth of the stock, a very bullish sign for shareholders.
Investors receive a 2.5% dividend. The Merrill Lynch price target for the stock is $50, and the Wall Street consensus target is $48. The shares closed Friday at $42.09.
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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 second-quarter earnings that came in above some estimates, slower growth and flat volumes brought out the sellers and they tagged the stock big time. 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 a 3.21% dividend. Merrill Lynch has a $52 price target, while the consensus target is set at $47.76. The stock closed Friday at $43.66.
McDonald’s
The fast-food giant has been hit hard since earnings were released, but it remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day.
More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.
The company reported solid second-quarter results, but the U.S. store comparable sales growth of just less than 2% disappointed investors. The Merrill Lynch team noted that charges and refranchising gains make the earnings numbers a bit dicey, so they lowered their GAAP numbers to $5.40 from $5.60.
McDonald’s shareholders receive a 3.07% dividend. The Merrill Lynch price target was lowered to $140. The consensus target is $129.45. Shares closed most recently at $119.75.
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Target
This top retailer has suffered from corporate decisions and may be an outstanding contrarian play. Target Corp. (NYSE: TGT) operates as a general merchandise retailer in the United States, offering household essentials, including pharmacy, beauty, personal care, baby care, cleaning and paper products.
The company offers music, movies, books, computer software, sporting goods and toys; electronics, such as video game hardware and software; and apparel for women, men, boys, girls, toddlers, infants and newborns; as well as intimate apparel, jewelry, accessories and shoes.
The company’s stock has plunged since a controversial corporate decision over bathrooms was implemented. While not all may agree, from an investing standpoint, savvy buyers who are willing to buy shares amid controversy may end up with an outstanding position in future years.
Target investors are paid a 3.4% dividend. The $85 Merrill Lynch price target compares with the consensus target of $75.24 and the most recent close at $70.81.
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All these companies have faced issues. However, investors that bought and held shares over time did very well on a total return basis. Dividend reinvestment plans also help long-term investors add shares at different prices and can help lower overall cost.
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