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3 Income Stocks to Buy with Market at New Highs

Christopher Vargas

The stock market rose to record highs again on Friday as part of a much longer and historic expansion in the US economy. Consumer spending drove US GDP to rise by a better-than-expected 2.1% in the third quarter

Analysts estimate GDP growth to come in at around 1.8% in the fourth quarter. Investors should now try to boost their returns with strong dividend paying stocks.

Prologis PLD is a real estate investment trust that has seen its shares climb 50% in 2019 and looks poised to continue its run in 2020. Prologis pays out a quarterly dividend with a solid 2.43% yield that can add to its already substantial returns. The REIT has surpassed our earnings estimates over the past four quarter with an average EPS surprise of 2.1%.

In addition to its strong recent performance, Prologis is the world leader in logistics real estate. The company owns warehouses and distribution centers that it rents to retailers, manufacturing companies, logistics companies, and the US Government.

The company seems like a solid investment to make, especially as logistic networks grow to supply the rapid increase in e-commerce. Some of Prologis’ biggest customers are, Amazon AMZN, Home Depot HD, and Walmart WMT. Our fiscal 2019 estimates call for earnings to grow 9.2% and for net revenue to increase 18.6%. This would outpace the top and bottom-line growth of 7.1% and 7.8% seen in fiscal 2018. PLD stock is currently listed as a Zacks Rank #1 (Strong Buy).

Best Buy BBY has put together a break out year as its shares have soared over 66% in 2019. The company has been able to thrive despite the stiff competition from the likes of Target TGT, Walmart, and Amazon. The company has focused on its services like consultation, installation, and technical support to gain and keep customers. And Best Buy pays out a dividend with a 2.71% yield.

The company’s efforts have proven successful as Best Buy has reported annual positive comparable store sales since 2014. Best Buy launched its Total Tech Support program in May of 2018 and has seen its members surge from 200,000 to 2 million in Q3 2020. The roughly $200 annual fee for membership should bolster top-line growth for years to come.

Our fiscal 2020 estimates forecast a bottom-line hike of 11.6% to $5.94 per share and for a top-line climb of 1.5% to $43.5 billion. The projected top line growth would be just under the 1.7% growth it saw in fiscal 2019 and the bottom-line growth would be below the 20% hike. BBY stock currently trades for about 14.9X its forward earnings, which is below the 15.5X the industry average. The discounted forward multiple provides a solid entry point to a stock that looks poised to carry its momentum in 2020. Best Buy stock currently sits at a Zacks Rank #2 (Buy).

Merck & Co MRK has seen its shares climb about 20% in 2019 and looks like a strong long-term play. Merk’s cancer immunotherapy drug, Keytruda, is one of the fastest-rising drugs on the market. Last year, Keytruda ranked as the third-best-selling drug in the world and helped drive MRK stock to gain of about 36% in 2018. By 2024, EvaluatePharma forecasts that Keytruda will become the world's top-selling drug with annual sales of $17 billion, which is more than double the $7.2 billion in revenue it generated last year. 

Merck also has other drugs in its portfolio with rising sales like its HPV vaccine, Gardasil, and its neuromuscular block reversal drug, Bridion. In addition to its break out drugs, the company pays out a dividend with a 2.71% yield, which it has steadily increased since 2011. With the projected rising revenue and earnings, Merck should be in a good position to continue adding to its dividend payout.

Our fiscal 2019 estimates forecast earnings to grow 18.7% to $5.15 per share and for net revenue to grow 11% $47 billion. Merck has surpassed our estimates in the past four quarters with an average EPS surprise of 12.5%. Merck has had its earnings estimates revised higher recently, helping earn MRK stock a Zacks Rank #2 (Buy).

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
The Home Depot, Inc. (HD) : Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Prologis, Inc. (PLD) : Free Stock Analysis Report
 
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