[cnxvideo id=”506831″ placement=”ros”]With 2016 winding down, many of the firms we cover on Wall Street are making some end of the year changes to their high conviction stock lists, and with good reason. After a solid year, with the S&P 500 up double digits, it just makes sense to tweak the portfolios and fine tune them not only for the stretch run, but for the start of 2017. With many strategists positive on the changes in Washington, D.C., 2017 could prove to be another solid year for investors.
In a recent research note, the analysts at Merrill Lynch make a big move by adding a top media and entertainment company to the firm’s well-respected US 1 list of stocks to Buy.
Walt Disney Co. (NYSE: DIS) is a top consumer media company with multiple streams of income to push revenue, and it becomes the newest member of the US 1 list. The stock continues outperforming on a near-term and long-term basis. With the movie studio business poised to improve, as with an accelerating theme park business, the network programming continues to drive viewership with extensive sports programming. Combining that revenue growth with the company’s solid media networks and interactive presence, and 2016 and 2017 revenue estimates could be conservative.
The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations, and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney channels and ABC Family, as well as UTV/Bindass and Hungama. This segment also owns eight domestic television stations. Disney is also one of 24/7 Wall St. top 10 stocks to own for the next decade.
The Merrill Lynch team feel the company is well-positioned to outperform in 2017 and that Disney has a solid catalyst pipeline for next year as well. They also feel the stock is cheaper from a growth standpoint to the S&P 500 for the next two years.
Disney shareholders are paid a 1.51% dividend. The Merrill Lynch price target for the stock is $125, and the Wall Street consensus price objective is at $106.86. Disney shares closed trading Monday at $105.30.
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In addition to this new addition, and we also screened the list for the top dividend companies in the portfolio. These are the three top-yielding dividend stocks in the US 1 portfolio.
AT&T
This stock 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.
The company recently 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 the announcement, after already being knocked down as the fear of rising rates hit the telecoms.
AT&T investors are paid a huge 4.65 % dividend. Merrill Lynch has a $46 price target for the stock. The consensus price objective is at $41.23. The stock closed Monday at $42.12 a share.
Digital Realty Trust
This top data center company is a solid play on the huge cloud and streaming content revolution. Digital Realty Trust Inc. (NYSE: DLR) supports the data center and colocation strategies of more than 600 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia.
Its clients include domestic and international companies of all sizes, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences and consumer products. The company rates highly with portfolio managers, as 8.39% of its market cap is in institutional hands.
The analysts cite the solid dividend and the potential for dividend growth. They also feel that data center pricing is still favorable, and the growth in adoption of the cloud is a positive going forward. Lastly, they feel the stock is underweighted by active managers and could see an uptick if they started adding shares.
Digital Realty investors are paid a very solid 3.65% distribution. Merrill Lynch has a huge $120 price target. The consensus price target is posted at $106.07. The shares closed Monday at $96.60.
MetLife
This top insurance company also pays very solid dividends. MetLife Inc. (NYSE: MET) is one of the largest U.S. life insurers and has become a significant global player. The company provides life insurance, annuities, employee benefits and asset management products in the United States, Japan, Latin America, Asia, Europe and the Middle East.
The Merrill Lynch team sees one-third of earnings coming from international, 30% from Group Benefits and Retirement, 20% from the to-be-split Brighthouse entity, and 15% in runoff from legacy retail life and annuity products.
MetLife investors are paid a 2.97% dividend. The Merrill Lynch price target is set at $55, while the consensus target is at $50.77. The shares closed the day on Monday trading at $53.92.
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While the US 1 list has slightly underperformed the S&P 500 year to date, it has outperformed since inception by a large margin. The stocks are among the highest conviction picks at Merrill Lynch and make good additions to any growth portfolio.
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