Investing

If Trump Wins, Look Out: 5 Ultra-Safe Stocks to Hide Out In

Lee Jackson

Published: November 2, 2016 9:55 am

Last Updated: January 13, 2020 1:37 am

Think about it. One year ago, anybody would have bet that there is no way that Donald Trump would be the nominee for President of the United States. Then he proceeded to face off against a who’s-who of Republican contenders and bested them all. Now, with less than a week left until the election, due to a litany of reasons we all know about, he is even or ahead in some polls and battleground states.

The reason that may be bad for the stock market is that Wall Street favors Hillary Clinton for a variety of reasons. The major one is she is known quantity, and regardless of how you feel about her stances on issues, they are at least something that Wall Street is familiar with. Trump on the other hand is a whole different ballgame, and he may look to shake up the status quo in a big way.

While any dip in the markets may be brief if he is elected, it could be steep. We screened the Merrill Lynch research universe for their safest stocks, as ranked by volatility risk, that pay dividends and are rated Buy. Five look like solid choices now.

AT&T

This company has had an incredible run this year but is off over 10% in less than six weeks. 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.

AT&T is in the Merrill Lynch US 1 portfolio and has several major catalysts that likely will drive strong network traffic demand: DirecTV Now and Mobile, “Data-Free TV” for DirecTV/U-verse subscribers and increasing penetration of unlimited data plans. Many on Wall Street believe that the company is well-positioned to address ongoing traffic requirements, with additional LTE capacity available and the ability to leverage small cell deployments.

The company announced a deal to Buy Time Warner for about $80 billion, which translates to about $105 to $110 per share. Two years ago, Time Warner rebuffed a takeover bid from 21st Century Fox at $85 per share. The chatter started on Thursday and carried into Friday, with a deal being announced over the weekend. The stock was hammered on Friday, after already being knocked down as the fear of rising rates hit the telecoms.

AT&T investors receive a 5.36 % dividend. The Merrill Lynch price target for the stock is $46. The Wall Street consensus price objective is $41. Shares closed Tuesday at $36.56.

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 new quarterly dividend is $0.39 per share on its common stock.

Investors are now paid a 2.2% dividend. Merrill Lynch has an $80 price target, and the consensus target is $76.81. Shares closed Tuesday at $70.99.
Eli Lilly

This is another stock with substantial upside potential, and it is on Merrill Lynch’s US 1 list. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.

The company posted third-quarter sales and earnings well below Wall Street’s expectations, prompting shares to plummet to a four-month low before rebounding. The stock is down almost 10% on the year and offering investors an outstanding entry point. Top analysts on Wall Street are still very focused on the company’s outstanding late-stage product pipeline, which they and others on Wall Street view as very undervalued.

Shareholders receive a 2.8% dividend. The Merrill Lynch price objective is $105. The consensus target is $96.60. Shares closed Tuesday at $72.98.

NextEra Energy

With a very strong balance sheet, this company looks poised for a solid fourth quarter of 2016 and into 2017, and it is on the Merrill Lynch US 1 list. NextEra Energy Inc. (NYSE: NEE) is a leading clean energy company with consolidated revenues of over $17.0 billion and approximately 44,900 megawatts of generating capacity, which includes megawatts associated with noncontrolling interests related to NextEra Energy Partners.

Headquartered in Juno Beach, Florida, NextEra Energy’s principal subsidiaries are Florida Power & Light Company, which serves approximately 4.8 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the United States, and NextEra Energy Resources, which, together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun.

Top analysts feel the company may very well be one of the top total return plays out of the large cap regulated space in the sector. One of the key drivers of NextEra’s growth has been the renewable energy development program, which continues to expand as the company adds new projects to its backlog. Those projects are expected to help grow 6% to 8% compound annual growth in adjusted earnings per share through 2018. Most on Wall Street feel that the steady earnings growth should also provide consistent dividend growth over that same time frame.

Shareholders receive a 2.76% dividend. The $149 Merrill Lynch price target compares with the consensus target of $133.94 and the most recent close at $125.89.

PepsiCo

This top consumer staples stock fits the bill. PepsiCo Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay’s and Ruffles potato chips; Doritos, Tostitos and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips and Fritos corn chips. The Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola and oat squares, as well as Aunt Jemima mixes and syrups, Quaker Chewy granola bars, Cap’n Crunch and Life cereals, and Rice-A-Roni side dishes.

Pepsi’s North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist and Mug brands, as well as ready-to-drink tea and coffee, and juices.

Shareholders receive a 2.82% dividend. The posted Merrill Lynch price target is $120. The consensus target is $118.53. Shares closed most recently at $106.71.

While the numbers appear to favor Clinton, stranger things have happened in politics, and if there was a big surprise, you can bet traders would not be thrilled. The recent headlines and the huge Trump following have closed the gap, and if he is declared the winner, we could see a large market drop next week.