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Merrill Lynch Rates 5 Dividend Aristocrat Stocks as Top 2018 Buys
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If there is one thing many investors look for when the market becomes expensive it is consistency. And if any group of stocks has delivered over the years in that category, it is the Dividend Aristocrats. While the bounce back in the markets Wednesday was a relief, the bottom line is the rally pulled off its highs quickly and showed that many people were still ready to sell once the bids firmed up.
We decided to revisit one our favorite group of stocks at 24/7 Wall St. The 2018 S&P 500 Dividend Aristocrats list is 53 companies that have increased dividends (not just remained the same) for 25 years straight. Keep in mind, just because they are on this list now doesn’t mean in the future they won’t be forced to reduce their dividend.
We screened the list for stocks rated Buy in the Merrill Lynch research universe and found five that looked solid and safe for nervous investors.
This is one of the top pharmaceutical stocks picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia, and neuroscience.
One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year the patent board instituted Coherus’s Inter Partes Review against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market.
Most on Wall Street feel that, based on the strength of Humira formulation patents and patent litigation timelines, a U.S. biosimilar is not expected until 2023. Also, Abbvie’s next-gen immunology agents should partially mitigate Humira revenue that eventually will be lost to U.S. biosimilars. In fact, analysts have cited continued Humira growth as a big catalyst for the shares going forward.
Shareholders are paid a solid 2.53% dividend. The Merrill Lynch price target recently was raised $136, and the Wall Street consensus price target for the shares is $125.20. The stock closed Wednesday at $112.22.
This old-school stock offers investors the stability and track record many seek now. Consolidated Edison Inc. (NYSE: ED) offers electric services to approximately 3.4 million customers in New York City and Westchester County; gas to approximately 1.1 million customers in Manhattan, the Bronx and parts of Queens and Westchester County; and steam to approximately 1,700 customers in parts of Manhattan.
The company owns 62 area distribution substations and various distribution facilities; 39 transmission substations and 62 area stations; electric generation facilities with an aggregate capacity of 724 megawatts that run on gas and fuel oil; 4,348 miles of mains and 369,791 service lines for natural gas distribution; and one steam-electric generating station and five steam-only generating stations.
The company operates 572 circuit miles of transmission lines; 14 transmission substations; 86,794 in-service line transformers; 3,994 pole miles of overhead distribution lines; and 1,889 miles of underground distribution lines, as well as 1,867 miles of mains and 105,482 service lines for natural gas distribution. In addition, it is involved in the sale and related hedging of electricity to retail customers, and the provision of energy-related products and services to wholesale and retail customers.
Shareholders are paid a 3.56% dividend. Merrill Lynch has an $83.50 price target, and the consensus target is $80.46. The shares closed most recently at $80.36.
This one flies under the radar of many investors and is a very solid buy at current trading levels. It is also on the Merrill Lynch US 1 list. Dover Corporation (NYSE: DOV) manufactures and sells a range of equipment and components, specialty systems, and support services in the United States and internationally.
The company operates in four segments. The Energy segment provides solutions and services for the production and processing of oil, natural gas liquids and gas to drilling and production, bearings and compression and automation end markets. The Engineered Systems segment offers precision marking and coding, digital textile, soldering and dispensing equipment, and related consumables and services.
The Fluids segment focuses on the safe handling of critical fluids across the retail fueling, chemical, hygienic and industrial markets. It also manufactures connectors for use in various bio-processing applications, as well as displacement and centrifugal pumps for demanding and specialized fluid transfer process applications.
Lastly, the Refrigeration & Food Equipment segment provides refrigeration systems, refrigeration display cases, specialty glass, commercial glass refrigerator and freezer doors and brazed heat exchangers.
Shareholders are paid a 1.77% dividend. The $115 Merrill Lynch price target compares with the consensus target of $104.67. The stock closed Wednesday at $106.21.
The fast-food giant does a ton of business overseas and still 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 fourth-quarter per-share earnings excluding items that were higher than the company earned last year, but revenue fell 5% year over year. However, the decline in the latest period was narrower than some analysts expected.
McDonald’s shareholders are paid a nice 2.35% dividend. The Merrill Lynch price target for the shares is $200. The consensus price objective is $186.57, and shares closed Wednesday at $171.14.
This is another top consumer staples stock that 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 2.68% dividend. Merrill Lynch has a $125 price target is posted, and the consensus estimate is $125.40. The shares closed Wednesday at $120.30.
These five Dividend Aristocrats members that are all rated Buy at Merrill Lynch. These are great stocks for long-term buy-and-hold accounts looking to add safety and dependable income. While not the most exciting companies in the world, they will certainly hold up much better than others should the market take a deep dive.
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