Merrill Lynch Makes Huge Late Summer Changes to US 1 Stock List

With second-quarter earnings reporting all but over, and the summer winding down, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the various indexes hitting or close to all-time highs again, it makes sense to examine the lists and make some changes, as the rest of the year could have additional volatility as the political and geopolitical cycle could prove to be very explosive component.

In a recent research note, the analysts at Merrill Lynch make a big move by adding AT&T Inc. (NYSE: T) to the firm’s well-respected US 1 list of stocks to Buy. Williams Co. Inc. (NYSE: WMB) was also added to the list, while American Electric Power Co. Inc. (NYSE: AEP) was removed, though it remains rated Buy at Merrill Lynch.

Both of the companies added to the list pay big dividends, and are reasonably conservative. These may make sense as we head to the more dangerous fall months, and with the market looking fully valued on many metrics.

We screened the Merrill Lynch US 1 list for other good total-return dividend-paying stocks and found four that are solid choices for more conservative accounts now.

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DowDupont

This result of a blockbuster merger in 2017 has emerged bigger and stronger, and the stock is on the Merrill Lynch US 1 list. DowDupont Inc. (NYSE: DWDP) is a diversified chemical company with $79 billion in sales in 2017, and it was formed as a result of the merger of Dow and DuPont.

The company is organized in three principal divisions: Agriculture (20% of EBITDA), Material Science (55%) and Specialty Products (25%). It intends to separate these into three public entities by 2020.

The stock has underperformed this year, and the concerns over the trade issues with China are continuing to keep shares under pressure. The stock is down over 15% from highs that were printed in January.

Shareholders are paid a 2.2% dividend. The Merrill Lynch price objective for the shares is $84, and that compares with a consensus analyst price target of $81.48. The stock closed Tuesday’s trading at $68.83 a share.

Exxon Mobil

This remains a top energy pick on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

Exxon also reported quarterly profits that fell short of analysts’ expectations, marking the fourth time in the past five periods the company has disappointed. The miss was largely due to weaker earnings in Exxon’s refining and marketing segment due to heavier-than-anticipated maintenance and operational problems. Exxon’s business producing oil and gas bolstered earnings, with the company saying it is favoring oil output over gas drilling in its U.S. shale fields.

Investors in Exxon are paid a very solid 4.16% dividend. Merrill Lynch has a price objective of $110, while the posted consensus target price is $88.88. The shares ended trading on Tuesday at $78.83 apiece.

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Mondelez

This consumer sector giant makes good sense for conservative accounts. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.

Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.

Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.

Mondelez shareholders are paid a 2.44% dividend. The $55 Merrill Lynch price target for the stock is well above the $48.74 consensus price target. The stock closed most recently at $42.56 per share.

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Target

This company has had its share of issues over the past few years, but it seems like a solid and safe retail total return play now. Target Corp. (NYSE: TGT) is one of the largest discount retailers in the United States, operating roughly 1,800 Target stores across the country. The company sells merchandise in its Signature Categories Style, Baby, Kids and Wellness, as well as other products in both physical Target stores and online at Target.com.

Since 2017, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to better compete against Amazon. Target has even embraced the same-day delivery concept. Most importantly, the company seems to have put some good distance between the headline issues that were public relations nightmares, and it continues to be a favorite destination of consumers. Plus, Target posted outstanding earnings for the most recent quarter on Wednesday morning.

Target shareholders are paid a stellar 3.09% dividend. Merrill Lynch has set its price objective at $90. The consensus target was last seen at $79.87, but the shares closed Tuesday at $83.27 and were up big in Wednesday’s premarket session.

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Two new additions to the US 1 list, plus four additional stocks that offer a degree of safety and solid dependable dividends. With the market going into summer vacation mode, and fall approaching, it makes sense to play things smart now, and these are good stocks to be in.