Investing

5 Very Safe Dividend Stocks to Buy Now and Hold Forever

Lee Jackson

Published: November 23, 2016 8:41 am

Last Updated: January 12, 2020 5:29 pm

With the markets warming up to the reality of a Donald Trump presidency and administration, some people have become nervous about dividend-paying stocks as they see higher interest rates and inflation ahead. While the bond proxy sectors like real estate investment trusts and utilities may hold less appeal as they are very slow growers, other sectors like consumer staples and telecoms still make sense since they can continue to grow market share.

We screened the Merrill Lynch research database for stocks with the firms best volatility rating, and solid growing dividends that were rated Buy. We found five that growth and income investors could buy now, and put in their portfolios forever.

What investors will want to not ignore is that some of these are still well off of highs. The post-election rally has been targeting many infrastructure and higher interest rate winners, so some of these may be overlooked.

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. The company has TV customers in the U.S. and 11 Latin American countries. In the U.S., 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. Trading at a very cheap 14.3 times estimated 2017 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors has not only driven traffic, but increased device financing plans.

AT&T is in the Merrill Lynch US1 portfolio and has several major catalysts that will likely 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 on-going traffic requirements, with additional LTE capacity available and the ability to leverage small cell deployments.

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

AT&T investors are paid a huge 5.08% dividend. The Merrill Lynch price target is set at $46, and the Wall Street consensus price objective is at $40.76. Shares closed Tuesday at $38.55.

  The Coca-Cola Company

This company remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, Vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, they are the No. 1 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 their beverages at a rate of more than 1.9 billion servings a day.

The company reported third quarter earnings that beat analysts’ estimates, but blamed strong international headwinds and political uncertainty for lower revenue. Net sales in the third quarter fell 7 percent from a year earlier to $10.6 billion, but were higher than Wall Street estimates of $10.5 billion. Coke’s better-than-expected revenue was helped by higher prices for sodas and a strong demand for water and sports drinks in North America.

Coke reported earnings of 49 cents for the quarter, excluding items, beating the average analyst forecast of 48 cents from Thomson Reuters. This makes seven-straight quarters that the company has surpassed Wall Street’s expectations.

It’s also important to remember that the company own 31.5% of Monster Beverage (NASDAQ: MNST), which continues to deliver big numbers and provide strong growth potential.

Coca-Cola investors are paid an outstanding 3.38% dividend. The Merrill Lynch price target is set at $50, while the consensus price target figure is set at $46.72. The stock closed Tuesday at $41.37.

GlaxoSmithKline

This top global pharmaceutical could offer outstanding total return for investors as a solid portfolio holding. GlaxoSmithKline PLC (NYSE: GSK) offers pharmaceutical products in the therapeutic areas, including respiratory, anti-virals, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, and emesis, dermatology, rare diseases, immuno-inflammation, vaccines, and HIV. It also provides consumer healthcare products in wellness, oral health, nutrition, and skin health areas.

Last year the company announced that the dividend would stay at its current level through 2017, a solid pledge for those seeking security. In addition, the FDA approved the company’s Nucala add-on product for severe asthma with a very broad label. Its ViiV Healthcare unit also reported promising data for its HIV treatments. GlaxoSmithKline is planning to submit up to 20 new regulatory filings within the next five years, which confirms a very strong pipeline.

The company posted strong third-quarter results, much of which were attributed to currency tailwinds. The Merrill Lynch team cite the attractive low-risk profile for investors, diversified growth potential, and the above average dividend.

GlaxoSmithKline investors are paid an outstanding 5.43% dividend. The Merrill Lynch price target for the Buy-rated stock is $47.50. The consensus price objective is set at $48.25. The shares closed Tuesday at $38.04.

Royal Dutch Shell

This company has survived the plunge in oil pricing as well or better than any other major integrated stock. Royal Dutch Shell plc (NYSE: RDS-A) operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids.

Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy. In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas (LNG) for transport, lubricants, bitumen, and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.

The company generated 3.83 billion cubic feet per day of natural gas in the second quarter of this year from its integrated gas operations and another 6.40 billion cubic feet per day from its upstream operations. The company produced solid third quarter results that exceed the Merrill Lynch expectations. They noted this in a recent research report:

We increase our estimates and price objective as a result of results – remaining above consensus. We reiterate our Buy rating and continue to see Royal Dutch Shell as our preferred Integrated Oil Supermajor.

Royal Dutch Shell investors are paid a huge 6.3% dividend. The Merrill Lynch price target is posted at $58, and the consensus price target for the euro oil giant is $59.94. The shares closed Tuesday at $50.76.

Procter & Gamble

The company has sold off dramatically since peaking in the summer and may be offering investors the best entry point that will be seen for some time. The Procter & Gamble Company (NYSE: PG) is a solid consumer staples stock for conservative investors to consider. The company sells lots of very well known household items that are essential for everyday life and operates through five segments: Beauty, Hair and Personal Care; Grooming; Health Care; Fabric Care and Home Care; and Baby, Feminine and Family Care.

The company posted solid earnings last quarter and many on Wall Street feel that the new focus on a slimmed down product portfolio will help spur earnings growth and return the company to it’s long-time premium consumer staples multiple. Some analysts estimates for the next two years are 2% above current Wall Street expectations.

P&G is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends. While currency headwinds have weighed on earnings and projections, a weaker dollar scenario would bode well for the future, especially given the current dollar strength.

Shareholders are paid a 3.25% dividend. The Merrill Lynch price objective is $97, and the consensus is at $92.72. The stock closed Tuesday at $82.76.

************

Maybe this seems like nothing exciting here on the surface. Maybe that’s exactly the point. With low volatility ratings, big dividends, and some growth potential, these companies are ideal for investors who want to own stocks that they can put in their portfolio and forget about.