Buy the stocks that pay you back

Stocks tumble with the Dow closing down more than 1,200 points


Dividend-paying stocks are back in fashion, even as long-term government bond yields have risen sharply this year. Traders seem to be craving quality stocks that offer consistent (and often increasing) dividends. These can be a more exciting investment than heavy Treasury bills.

Quarterly or annual dividend payments provide good income streams for investors who need short-term cash. And for those playing the longer game, dividends can be reinvested to buy even more shares in those same companies.

the S&P 500 High Dividend ET (SPYD)it’s down just 4% this year and up slightly over the past 12 months, a much better performance than the broader market. The S&P 500 has plunged more than 17% in 2022.
The high-dividend fund, as its name suggests, has exposure to companies that offer big returns, such as energy giants. exxonmobile (XOM) Y Chevron (CLC). Both stocks have soared this year as oil prices have soared.
Other major holdings in the fund include cardinal health (CAH), Principal Financial (GFP) and technology services company iron mountain (MRI). All three stocks are also in the green this year, with Cardinal Health up 30%.
Americans should brace for higher natural gas prices, says Chevron CEO

It makes sense that dividend stocks are doing well in these tumultuous economic times. When a company pays a dividend, and continues to steadily increase it, that is a sign of financial stability.

“Dividend payers do well in times of inflation. Many of the stocks are high-quality blue-chip players with pricing power and strong balance sheets,” said Austin Graff, co-chief investment officer at Titelist Asset Management and manager. of TrueShares Low Volatility. Equity ETFs.
As such, many consumer staples companies — that is, food and beverage giants that can be counted on for reliable sales and earnings growth — tend to be high-dividend stocks. Dr Pepper Keurig (KDP) Y Phillip Morris (P.M) both announced on Wednesday that they were increasing their dividends, for example.

Growing companies also pay dividends

With more market volatility likely ahead, investors who still want stocks over bonds may continue to look to dividend payers. Even the tech sector has its fair share of dividend plays, including Apple (AAPL), Microsoft (MSFT) Y Oracle (ORCL).

However, Graff said investors looking for dividend stocks should focus on more than just their returns. Because the dividend yield is the annual payout divided by the stock price, the highest-yielding stocks are often so-called value traps, companies with plummeting stock prices.

Graff said he prefers companies with decent, if not sky-high, returns that are also steadily increasing their dividends. Investors can find businesses that can generate sales and earnings growth at a healthy pace.

Some examples? graff owns United Health (UNH)utility American electric power (AEP) and cybersecurity company NortonLifeLock (NLOK)in the background.
How do you like apples?  Stock could get an iPhone 14 pop

UnitedHealth’s dividend yield is 1.2%, NortonLifeLock’s yield is 2.2%, and American Electric Power’s yield is 3%. Thus, yields remain low enough (less than the current rate of 3.4% for a 10-year Treasury bond) to keep increasing dividends even as companies invest in their businesses to keep earnings in check. increase.

“These are not just companies that have nothing better to do with their cash,” Graff said.

So it is no longer the case that dividends are only for conservative investors or retirees on a pension or other fixed income.

“If you were asked to imagine a typical dividend investor, you would probably conjure up an elderly widow or widower,” Jack Ablin, chief investment officer at Cresset Capital, said in a report earlier this month. “But now that monetary policy is tightening, dividends are once again taking center stage. Investors see dividends as offering a modicum of certainty in an uncertain investment environment.”


Source link