Investing

5 Bottom-Fishing Blue-Chip Dividend Stocks to Buy Right Now

Lee Jackson

Published: March 20, 2020 7:06 am

Last Updated: March 20, 2020 8:58 am

Happy spring indeed! After a brutal week for investors, with the S&P 500 plowing through the 2018 lows, and then bouncing back, there is at least a hint that maybe some of the selling may be over. Thursday’s trading action brought a much-needed rally in oil, as well as the sense that some of the bigger Wall Street players are starting to buy. The coronavirus continues to spread, but numerous positive reports suggest that the procedures put into place are starting to help, and while clearly far from over, the actual worst may be behind us.

In just a month, all the market gains that occurred during the Trump administration are gone, and investors that held onto their portfolios are looking at staggering paper losses, and those who sold are contemplating what to do next, especially income investors. With interest rates above the panic lows but still at generational lows, those looking for income from stocks may be in the best place in a while. High-yielding, safer blue chips are available at rock bottom prices, so we decided to look through the Merrill Lynch research database for stocks rated Buy that are paying big, safe dividends. We found five that investors can start to nibble at now.

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AT&T

This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and 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 postpaid subscribers.

While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.

News reports indicate that AT&T is in discussions with banks for a new term loan of roughly $3 billion as part of an effort to explore financing options and help the company navigate rising costs in the market. The phone and media giant has been selling off parts of its business, chunks of real estate, receivables and preferred stock to help reduce the large debt and fund 5G network expansion, stock buybacks and dividends. One would think buybacks would be shelved now to preserve cash.

Investors receive a significant 6.67% dividend. Merrill Lynch has a $43 price target for the shares, while the Wall Street consensus target is $39.43. AT&T stock closed down over 5% on Thursday at $31.15.

Bristol-Myers Squibb

This remains a solid pharmaceutical stock to own and a safe play for growth and income accounts. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.

The company reported solid fourth-quarter results last week, and Merrill Lynch noted this:

Bristol reported strong 4Q results (though largely ahead of Street given the recognition of Celgene revenue). We highlight the 2020 / 2021 provided guidance as the key focus for investors, as well as +$5 billion increase in share repurchase. While guidance comes in light, we expect the results to be viewed favorably by the Street and look for share strength.

Shareholders receive a 3.70% dividend. The Merrill Lynch price target is $75, and the consensus target is $72.30. Bristol-Myers stock closed on Thursday at $48.79, down almost 3% on the day.

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This top media and entertainment company remains a Wall Street favorite and should see increased viewership and demand during the current work-from-home environment. Comcast Corp. (NASDAQ: CMCSA) is the largest U.S. provider of cable services, with over 22 million basic subscribers. It owns NBCU, which includes the NBC TV Networks, Telemundo, MSNBC, USA, Syfy, Bravo, E!, CNBC and several other cable networks, as well as Universal Films and Universal Theme Parks.

Comcast has invested in technology to build an advanced network that delivers among the fastest broadband speeds and brings customers personalized video, communications and home management offerings. Though, it is also one of the companies with the biggest corporate debt.

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The company offers shareholders a 2.58% dividend. The $50 Merrill Lynch price target is in line with the $50.41 consensus price target. Comcast stock closed most recently at $35.94 per share.

Lowe’s

This company has a low 6% of foreign sales, which has helped in a strong-dollar scenario. Lowe’s Companies Inc. (NYSE: LOW) is a leading home improvement retailer with more than 2,000 stores in North America. The company has tempered its new store opening plans and is focusing investments on technology and e-commerce capabilities, in addition to improving its retail store productivity.

Lowes offers products for maintenance, repair, remodeling and home decorating. It provides home improvement products under the categories of kitchens and appliances, lumber and building materials, tools and hardware, fashion fixtures, rough plumbing and electrical, lawn and garden, seasonal living, paint, home fashions, storage and cleaning, flooring, millwork, and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.

Given the time out of the office many workers now have due to working at home, some top analysts think that spring cleaning and improvement buying at the big-box stores like Lowe’s could be a much bigger factor than usual.

Investors receive a 3.65% dividend. Merrill Lynch has set its price target at $143. The posted consensus target is $126.69, and Lowe’s stock was last seen at $69.87, after a gain of almost 7.5% on Thursday.

McDonald’s

The fast-food giant continues to revamp both stores and the menu, and it is a solid pick for conservative accounts, especially while it can continue to serve even while the restaurants are shuttered for indoor customers now. 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.

Fourth-quarter 2019 diluted earnings increased 14% (15% in constant currencies). Included in the results was $84 million ($0.11 per share) of income tax benefit due to new regulations issued in the quarter related to the Tax Act. Yet another fine quarter for a blue chip leader that has delivered for years.

Shareholders receive a 2.60% dividend. The Merrill Lynch price target is a stunning $240. The consensus price objective is $227.10. Given that McDonald’s stock last seen trading at $149.50, up almost 9% on Thursday, this still looks like an incredible buy.

These five companies do much of their business right here in the United States but their shares have been absolutely crushed. It makes sense to start to acquire small lots of these quality names, as we are still in a supercharged volatility market, and people remain very worried about the future. With that noted, these companies will remain at the top of the ladder as they are well run and offer investors solid conservative ideas at what could be a market low for now.