To many investors, this may seem like a virtual replay from times past. The Federal Reserve resorted to a tactic not used since 1995 when it lowered interest rates 25 basis points at the end of July. Still, the economy is still in solid shape and unemployment is at the lowest levels in 50 years.
The bottom line is that with much European sovereign debt trading with negative rates, demand may continue for U.S. Treasury debt, pushing yields even lower, as evidenced by the 10-year Treasury hitting a three-year low yield and the 30-year Treasury bond trading at an all-time low yield.
With super-safe Treasury debt way overbought and too expensive, very secure dividend stocks are the way to go now, and we found five that look very solid and various Wall Street firms that we cover here at 24/7 Wall St. have Buy or equivalent ratings of them.
AT&T
This is a very safe way for investors looking for income, and it is on the Merrill Lynch US 1 list. AT&T Inc. (NYSE: T | T Price Prediction) is the world’s largest provider of pay TV. The company has TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE.
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The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. With shares 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 reported solid operating results in the second quarter, including consolidated revenue growth, expanding operating income margin and record operating and free cash flow. AT&T’s consolidated revenues for the second quarter totaled $45.0 billion, up 15.3% from a year ago, primarily due to the Time Warner acquisition.
Declines in revenues from legacy wireline services, Vrio, domestic video and wireless equipment were more than offset by the addition of WarnerMedia and growth in domestic wireless services, strategic and managed business services, IP broadband and Xandr.
AT&T shareholders receive a 5.95% dividend. Merrill has a $37 price target on the shares, and the Wall Street consensus target is $34.54. The shares were trading on Friday’s close at $34.97.
Coca-Cola
This company remains a top Warren Buffet holding and offers not only safety but also an incredibly strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola investors receive a 2.97% dividend. Merrill has a $60 price target, while the consensus target is $57.22. The stock closed at $54.41 on Friday.
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First Energy
This higher-yielding stock also may have among the best total return potentials. FirstEnergy Corp. (NYSE: FE) is a conglomerate of 10 electric utilities, including Ohio Edison, Cleveland Electric Illuminating, Pennsylvania Power, Toledo Edison, Jersey Central Power & Light, Metropolitan Edison and Pennsylvania Electric.
FirstEnergy is dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation’s largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company’s transmission subsidiaries operate more than 24,500 miles of transmission lines that connect the Midwest and Mid-Atlantic regions.
Shareholders receive a 3.44% dividend. The $51 Merrill price objective is higher than the $47.53 consensus price target. The stock was trading most recently at $44.68.
Marathon Petroleum
This is the largest refiner in the United States and a much more conservative way to play energy. Marathon Petroleum Corp. (NYSE: MPC), one of the largest independent petroleum refining and marketing companies in the United States, is based in Findlay, Ohio. It owns seven refineries in the United States with total throughput capacity of around 1.7 million barrels per day.
The company operates approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.
The company bought rival refining giant Andeavor last year for $23.3 billion in the biggest-ever deal for an oil refiner, creating the largest independent fuel maker in the United States. It was one of the biggest mergers in 2018.
Following the deal, Marathon became the largest operator of refining capacity in the United States, and management believes the company can achieve the $1 billion in synergies that it suggests. In addition, many on Wall Street give the company no credit for the possible International Maritime Organization change, which implies additional potential upside.
Shareholders receive a 4.5% dividend. RBC has set its price target at $66. The consensus target is up at $78.94, but the shares ended the week at $46.22.
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McDonald’s
While the fast-food giant does a ton of business overseas, it remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global food-service retailer with over 37,000 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 businesspersons, and it is one of the most valuable brands in the world.
The company reported second-quarter 2019 adjusted earnings per share that matched the Wall Street consensus estimate. Up 6.5%, global comparisons beat some estimates, with strong performance across the board, including the United States, which was up 5.7%. Wall Street analysts expects strong performance for McDonald’s to continue as strong comps support store level returns, accelerating net store growth.
McDonald’s offers a 2.11% dividend yield. The Goldman Sachs price target is $250. The consensus price objective is $231.54, and shares closed trading at $218.47.
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The bottom line is that despite the markets tendency to rally on any scrap of good news, we remain in very volatile waters, and the likelihood of a deal with China remains questionable. With rates going lower, income-starved investors should be returning to these top companies, and nervous investors should hop on-board as well.
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