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Merrill Lynch Says Time to Buy These 5 Top Dividend Aristocrat Stocks

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There is almost no question that the market is getting a little tired and long in the tooth. Having rallied since March of 2009 and becoming a full-fledged bull market with the March 2013 breakout through the 1,500 level, investors who have been long stocks have been well rewarded. Now may be the time to lower exposure and keep capital in dividend-paying stocks with history of increasing the payouts to shareholders.

The 2017 S&P 500 Dividend Aristocrats list is 51 companies that have increased dividends (not just remained the same) for 25 years straight. We screened the list for stocks rated Buy in the Merrill Lynch research universe, and found five that if purchased soon will reward investors with a dividend early next quarter.

Abbott Laboratories

This top pharmaceutical stock has very solid growth potential and income. 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.

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.

The company also offers a diversified large cap play as earnings are split between five well-positioned business segments: Nutritionals (31.0% of revenues), Vascular (13.0%), Generic Pharmaceuticals (20.0%) and Diagnostics (25.5%) and Diabetes (10.5%).

Abbott Labs investors receive a 2.36% dividend. The Merrill Lynch price target for the stock is $50, and the Wall Street consensus target is $47.23. The shares closed Thursday at $44.98. The stock goes ex-dividend on April 11.

Franklin Resources

This company is a mutual fund powerhouse and continues to grow its huge asset base. Franklin Resources Inc. (NYSE: BEN) is among the largest and most global managers. It markets mutual funds and institutional separate accounts under Franklin, Templeton and Mutual Series brands. At times, 50% of its sales are from outside the United States, an advantage given a maturing U.S. market.

The continuing bull market has proven to be a solid tailwind for the company, and while withdrawals from baby boomers may be a concern, the path forward looks solid.

Shareholders are paid a 1.82% dividend. Merrill Lynch has a $50 price target. The consensus target is $39.82, but the shares closed on Thursday at $43.91. The shares will go ex-dividend on March 29.

General Dynamics

This company, like other major defense prime contractors, has had a very solid year and remains one the best ideas at Merrill Lynch in the space. General Dynamics Corp. (NYSE: GD) is engaged in business aviation, land and expeditionary combat vehicles and systems, armaments, munitions, shipbuilding and marine systems, and information systems and technologies.

Major products include Virginia-class nuclear-powered submarine and Ohio class replacement, Arleigh Burke-class Aegis, Abrams M1A2 tank, Stryker 8-wheeled assault vehicle, medium-caliber munitions and gun systems, tactical and strategic mission systems.

Shareholders receive a 1.76% dividend. The $210 Merrill Lynch price target compares with the consensus target of $203.06. Shares closed Thursday at $190.65. They will go ex-dividend on April 5.

Nucor

This top steel company could do very well if the economy sees a solid pickup this year and the administration’s infrastructure push remains in place. Nucor Corp. (NYSE: NUE) and its affiliates are manufacturers of steel products, with operating facilities primarily in the United States and Canada. The company also is North America’s largest recycler.

Nucor products produced include: carbon and alloy steel, in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Through the David J. Joseph Company, Nucor also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap.

While the residential construction market could slow down some in 2017 after years of a very torrid pace, top Wall Street analysts remain positive on nonresidential commercial construction. Nucor always has kept a very conservative balance sheet and is poised for slow but steady growth next year and beyond, especially of a huge infrastructure build-out becomes a reality.

Nucor investors receive a 2.34% dividend. Merrill Lynch has set its price target at $76. The consensus target is $66.73. The stock closed Thursday at $64.60 and will go ex-dividend on March 29.

Sysco

This stock is a safer play for more conservative accounts and another Merrill Lynch 2017 pick. Sysco Corp. (NYSE: SYY) is the largest North American foodservice distributor, with roughly $50 billion in sales in fiscal 2016 and an estimated 16% market share in the United States. It distributes food and nonfood items to more than 425,000 customers globally, including restaurants, health care facilities, hotels, educational facilities and retail locations.

Prior to the Brakes acquisition, 89% of the company’s revenues were generated from its U.S. operations in fiscal 2016, with roughly 11% from Canada and other international operations.

Shareholders receive a 2.34% dividend. The Merrill Lynch price objective is $60, while the consensus target is $54.38. The stock closed most recently at $52.31. Shares go ex-dividend on April 5.

Remember ex-dividend mean “without the dividend” so shares must be bought prior to that date. Also, companies can change the date, so if you are looking to buy any of these top stocks, make sure you double-check when the date is.

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