Depending on which financial pundit you listen to, the market is either fully valued or very close to it, especially if you factor in rate cuts that are looking ever more likely. Only there is one big problem: The Federal Reserve waited way too long to raise rates this cycle, and with federal funds at what is still a historically very low 2.5%, they don’t have near the dry powder that they had back in 2008 when the mortgage disaster almost took the entire financial system down with it.

So the question for investors is what to do now? One thing looks pretty obvious. The FAANG stocks, which have driven market gains for the past five years, are very vulnerable, as the politicians in Washington are not happy with the use of consumer data, privacy issues censoring debate and a host of other reasons. Continued trade and tariff issues not only weigh on sentiment but also are bound to increase prices.

We decided to look at some contrarian ideas that both make sense now and pay solid dividends. In the Merrill Lynch research database we found five stocks that are rated Buy but have been beaten down and offer perhaps a degree of safety in a very expensive and tired stock market.

American Airlines

This company has its major hub in Dallas, where business continues to boom. American Airlines Group Inc. (NASDAQ: AAL) is the holding company for American Airlines.

Together with wholly owned and third-party regional carriers operating as American Eagle and US Airways Express, the airlines operate an average of nearly 6,700 flights per day to 350 destinations in over 50 countries from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.

Investors receive a 1.32% dividend. Merrill has a price target of $38, while the Wall Street consensus target is $42.22. Shares closed Thursday at $30.38.

Citigroup

This top bank stock was hit during the spring and offers a very solid entry point. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.

Trading at a still very cheap 8.8 times estimated 2019 earnings, this company looks very reasonable in what remains a pricey stock market. A continuing stock buyback program at the bank also is a positive.

Investors receive a 2.73% dividend. The Merrill Lynch price objective is $77, and the consensus target price is $79.92. Shares closed trading at $66.47 on Thursday.

Exxon

This top Wall Street energy pick has been under pressure as oil prices have dropped dramatically. 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.

Exxon 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.

For 75 years in a row, Exxon has raised its dividend (split adjusted, of course). Thanks to its vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain. Earlier this spring the company raised its dividend from $0.82 to $0.87 per share.

Shareholders receive a 4.68% dividend after the increase. The $105 Merrill price objective is well above the $85.03 consensus figure. The stock closed at $74.31 a share.

Simon Property

Simon Property Group Inc. (NYSE: SPG) invests in the real estate markets across the globe. It engages in investment, ownership, management and development of properties. The company primarily invests in regional malls, premium outlets, mills and community/lifestyle centers to create its portfolio.

Through its subsidiary partnership, it owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European real estate investment trust (REIT) with over 260 shopping centers in 13 countries.

One key driver of growth will include the more than $1.0 billion of development/redevelopment planned over the next few years. Merrill Lynch also feels that the company’s high-quality portfolio has weathered the retail storm much better than most.

Shareholders receive a 4.95% distribution. Merrill has set its price target at $215. The consensus price target is $196.89, and shares closed most recently at $163.63.

Verizon

This top telecommunications company offers tremendous value. Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world. Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide.

Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Investors receive a 4.2% dividend. The Merrill price target is $64. The consensus target is $59.64, and shares were last seen at $57.54.

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Not only are these five top blue chips priced right, but they pay dependable dividends. We are clearly in a vulnerable market, and while the economy is still reasonably solid, indicators have slowed, the summer is all but upon us and the geopolitical and domestic political arenas remain volatile.

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