With earnings for the fourth quarter pouring in, and the first quarter of 2020 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 momentum strength not seen in years, it makes sense to examine the lists and possibly 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.

In a recent research note, the analysts at Merrill Lynch make a big and somewhat contrarian move by adding American Electric Power Inc. (NYSE: AEP) to the respected U.S. 1 list of top stock picks.

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The company is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states. The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. American Electric also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

This is somewhat of a contrarian call as the utility sector as a whole has had a huge run over the past few years, and interest rates have plummeted again as the Federal Reserve went back to cutting them and using “short-term” quantitative easing.

American Electric Power shareholders receive a solid 2.80% dividend. The Merrill price target for the shares is $106, while the consensus price target across Wall Street is $99.60. Shares closed trading on Wednesday at $100.

We screened the U.S. 1 list looking for other companies that are “less crowded” trades and also pay dependable dividends. The following four make sense for investors who want to stay invested but have become a little nervous as the big market rally rolls on.

Baker Hughes

This is another somewhat contrarian play, and it makes sense for investors looking for energy exposure. Baker Hughes (NYSE: BKR) is an international industrial service company and one of the world’s largest oilfield services companies. It provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting.

The company posted inline results, but the Merrill Lynch team saw some positives and noted this on Wednesday:

The company posted adjusted EBITDA of 900 million which was in-line as really strong operating margins helped offset the Turbomachinery & Process Solutions (TPS) revenues miss and oilfield services operating margin softness. The $1 billion of free-cash-flow nearly doubled consensus expectations as management focuses on cash flow efficiency. A positive release as TPS exhibits its earnings power while the company proves it can generate strong free-cash-flow.

Shareholders receive a solid 3.17% dividend. Merrill Lynch has a price target set at $34, and it compares to the posted consensus target of $29.21. The stock closed most recently at $22.68 a share.

BlackRock

Many on Wall Street love this firm’s growth potential near term and especially long term. BlackRock Inc. (NYSE: BLK) is the largest asset manager in the world, with more than $5 trillion in assets under management. Its acquisitions of Merrill Lynch Investment Management and iShares transformed it from a fixed income manager into a multiproduct and multichannel giant, with roughly 40% of its assets under management overseas. It has leading franchises in exchange-traded funds (ETFs), institutional fixed income, alternatives and cash. It also operates Solutions, a leader in risk analytics.

BlackRock’s strong historical and prospective dividend growth is underpinned by the high-quality and diversified business model. Dividends have increased 18% annually over the past 10 years. Dividend growth likely will moderate but remains solid in the low teens, consistent with expectations for earnings growth in the years ahead.

BlackRock shareholders are paid a 2.46% dividend. The stunning $590 Merrill Lynch price objective compares with a slightly higher consensus price target of $592.29. Shares closed at $536.86 on Wednesday.

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Raytheon

This company has a diversified mix of businesses and remains a defense and aerospace favorite at Merrill Lynch. Raytheon Co. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services. The company operates in four principal business segments: Integrated Defense Systems, Intelligence, Information and Services, Missile Systems, and Space and Airborne Systems. It is among the companies that make the most from the U.S. government.

With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.

On June 9, 2019, United Technologies and Raytheon agreed to merge their businesses to create a new aerospace and defense powerhouse. The two companies have received unanimous approval from their respective boards. The new company will be called Raytheon Technologies.

Shareholders in Raytheon receive a 1.64% dividend. The Merrill Lynch price objective is $265. The consensus target price is $234, and the shares ended Wednesday’s trading at $229.41.

Target

This remains a solid and safe retail total return play, but it was hit hard after posting disappointing holiday sales results. 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.

The stock stumbled last week after the company said sales of toys, electronics and home furnishings over the critical holiday shopping season weren’t as strong as expected, with sales up 1.4% between November 1 and December 31 in stores and through its digital channels. Target warned that overall growth for its fiscal fourth quarter, which includes January, likely will come in at less than half the 3% to 4% growth it had expected.

Since 2017, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to compete better against Amazon. The recent pullback offers investors a solid entry point after the stock had run.

Target offers shareholders a 2.10% dividend. Merrill Lynch has set a $150 price objective. The consensus target is $135.57, and the stock closed most recently at $113.90 per share.

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One brand new addition to the respected Merrill Lynch U.S. 1 list and four additional ideas to that list that offer solid growth and dependable dividends. Given the big market moves, it may be wise to buy partial positions and see if late January or February doesn’t bring a small pullback.

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