With earnings reporting for the second quarter in full swing, and the third quarter of 2019 well underway, 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 market showing the potential for increased volatility as it makes new all-time highs, it makes sense to examine the lists and make some changes. It is very possible the rest of the year could have additional volatility as the political and geopolitical cycle could prove to be very explosive components.

The Merrill Lynch US 1 list is a collection of the company’s Global Research analysts’ best investment ideas, drawn from the universe of Buy-rated, U.S.-listed stocks, including American depository receipts. The list is managed with a goal of providing superior investment performance over the long term.

We screened the list looking for the stocks paying the highest dividends, as rates are going nowhere this year or next, and the total return component of dividend-paying stocks is big.

AT&T

This company is a telecom component on the Merrill Lynch US 1 list. AT&T Inc. (NYSE: T) is the largest U.S. telecom company. It provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections with 77 million post-paid subscribers. AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition. Through its Warner Media unit, AT&T operates a diversified media and entertainment business.

The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. Trading at a very cheap 9.4 times estimated 2019 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.

AT&T shareholders receive a rich 6.05% dividend. Merrill Lynch has a $37 price target on the stock, while the Wall Street consensus is $35.36. The shares closed trading last Friday at $33.09 apiece.

BB&T

The Merrill Lynch bank team has remained very positive on this company, and the stock was added to the US 1 list back in February. BB&T Corp. (NYSE: BBT) is a Winston-Salem, North Carolina–based financial services company with more than $200 billion in assets. With a history dating back to the Civil War, it is currently the ninth-largest bank in the United States by deposits and sixth largest by number of branches.

Building on a long tradition of excellence in community banking, BB&T offers a wide range of financial services including retail and commercial banking, investments, insurance, wealth management, asset management, mortgage, corporate banking, capital markets and specialized lending. The company operates over 2,100 financial centers in 15 states and Washington, D.C.

The recent announcement of the merger between BB&T and SunTrust took Wall Street by storm, and when completed it will make the combined company the sixth-largest U.S. bank.

Investors in BB&T enjoy a solid 3.17% dividend. The Merrill Lynch price target for the shares of $58 compares with a posted consensus target of $55.00. The stock was last seen trading at $51.03 a share.

Merck

This remains a leading health care stock pick for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular issues, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, male pattern hair loss and fertility diseases.

The company also provides neuromuscular blocking agents for use in surgery, anti-bacterial products for skin and skin structure infections, cholesterol modifying medicines, non-sedating antihistamine and vaginal contraceptive products.

Merck shareholders receive a 2.66% dividend. The $88 Merrill Lynch price target is well above the consensus target last seen at $83.02. The shares closed trading at $82.69 on Friday.

Target

This remains 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.

Over the past couple of years, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to compete better against Amazon. Target has even embraced the same-day delivery concept and is expanding retail floor space for toys as it looks to scoop market share after the closing of Toys “R” Us.

Solid numbers and a very positive analysts day had the Merrill analysts noting that they believe the company’s ability to moderate fulfillment costs through its “stores as hubs” model should drive margin improvement in fiscal 2020. They also feel the valuation is compelling at current levels.

Target shareholders are paid a 2.98% dividend. Merrill Lynch has set its price objective at $100. That compares to the much lower consensus target of $85.73, as well as the most recent close at $76.75.

Williams Companies

This top energy company is also a solid pick for more conservative accounts. Williams Companies Inc. (NYSE: WMB) is now largely a pure-play domestic natural gas infrastructure company that has a 74% ownership interest in its underlying master limited partnership, Williams Partners.

The company has a lower risk, fee-based business model with some volume sensitivity. Natural gas demand continues to be driven by liquefied natural gas (LNG) exports, power generation and industrials. In addition to steady demand growth, Marcellus production and associated gas in the Permian are expected to continue to be primary supply drivers.

Shareholders receive a very sizable 5.52% dividend. The Merrill Lynch price target is at $31. The analysts’ consensus target is $31.94, and the shares were last seen trading at $27.56 apiece.

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These five outstanding ideas from the US 1 team at Merrill Lynch are decidedly more conservative than some of the other members. Given their strong and consistent dividends, they offer investors excellent total return potential and a safer way to play the stock market going forward in 2019.

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