Investing

Merrill Lynch Has 4 Top Dividend Aristocrat Stocks to Buy Now

Lee Jackson

Published: September 19, 2016 9:45 am

Last Updated: January 13, 2020 3:26 am

Despite the almost constant chatter on whether the Federal Reserve raises rates this week, many top strategists on Wall Street are convinced the Fed holds off until at least December, and maybe until 2017. While Fed Chair Janet Yellen and members of the Federal Open Market Committee may start to ramp up a more hawkish tone at the end of the year, any interest rate increases will be very patient and deliberate.

The 2016 S&P 500 Dividend Aristocrats list includes 51 companies that have increased dividends (not just remained the same) for 25 years straight. Keep in mind that just because they are on this list now doesn’t mean in the future they will be forced to reduce their dividend. We screened the list for stocks rated Buy in the Merrill Lynch research universe and found four that looked solid and safe for nervous investors.

Colgate-Palmolive

This top dividend payer is also a very safe play for investors. Colgate-Palmolive Co. (NYSE: CL) is the stock to buy in consumer staples. The company continues to deliver solid execution and is one of the best-positioned companies in the consumer staples sector, given its strong brands in attractive categories, particularly oral care.

More than half (52%) of total revenues at Colgate are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across the Brazil, Russia, India, China (BRIC) regions. While those have slowed over the past year, a pickup in growth could be coming.

Back in the spring, Colgate increased the quarterly common stock cash dividend by 3%. The company has declared a new quarterly dividend of $0.39 per share on its common stock and will go ex-dividend next month on October 20.

Colgate investors are now paid a 2.2% dividend. The Merrill Lynch price target for the stock is $80, and the Wall Street consensus target is $76.56. The stock closed on Friday at $71.96.

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 Coke stock big time. It is important to remember though that the company owns 31.5% of Monster Beverage, which continues to deliver big numbers.

Coca-Cola investors receive an outstanding 3.32% dividend. Merrill Lynch has a $50 price target, while the consensus target $47.44. The stock closed Friday at $42.14.

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. Merrill Lynch noted that charges and refranchising gains make the earnings numbers a bit dicey, so the firm lowered its GAAP numbers to $5.40 from $5.60.

McDonald’s shareholders receive a 3.07% dividend. Merrill Lynch lowered its price target to $140. The consensus target is $129.09. The shares closed Friday at $115.28.

3M

This top industrial could really jump with an economic pickup. 3M Co. (NYSE: MMM) is a diversified, global manufacturer. Its businesses are technology-driven and organized under five segments: Consumer, Safety and Graphics, Electronics and Energy, Healthcare, and Industrial. Its popular brands include Scotch, Post-It, 3M and Thinsulate. The company also holds over 500 U.S. patents.

3M posted outstanding second-quarter results, and the company adjusted the midpoint of its guidance, the analysts remain positive but note the company, like many, faces a tough global macro environment. They do think the results are strong in relation to peers and feel that the focus toward return on invested capital will yield multiple expansion and earnings growth.

3M investors receive a 2.45% dividend. The $200 Merrill Lynch price target compares with the consensus target of $182.57 and the most recent close at $175.06.

There is nothing really exciting to see here, just companies that have been around forever and, regardless of politics, macro changes and headlines, will be around for the foreseeable future. These stocks are perfect fits for conservative growth and income portfolios.