Displaying items by tag: yields

(New York)

Income stocks are a tough asset to place right now. On the one hand they have provided steady income since the Crisis, but as rates have risen, they have started to be wounded by losses and their yields no longer look as promising. Only 25% of stocks in the S&P 500 have yields higher than the 10-year Treasury bond. But what about stocks that are still handily out-yielding bonds? The best places to look are in consumer staples (averaging 3.3% yields), real estate (3.4%), telecom (5.4%), and utilities (3.6%).

FINSUM: So you can still get some great yields, but the big risk at the moment is capital losses because of rising rates.

(New York)

Rates are rising, and that usually means bad news for income stocks. This time looks no different. Both utilities and real estate have been wounded this year, with both down between 3% and 6% for the year. The sectors are also getting increasingly unfavorable ratings from analysts.

FINSUM: We are pretty worried about losses coming for good income stocks as short-term Treasuries are yielding so much. Additionally, the Fed is sounding more hawkish, which only adds momentum to losses for rate sensitive equities.

(Washington)

In a widely expected move yesterday, Jerome Powell announced the first hike of his stint as the head of the Fed. The move was a quarter point higher to between 1.75% and 2%. Powell promised to be more open and transparent about the Fed’s outlook than in former times. Powell presented the rosiest outlook on the US economy in memory, repeatedly expressing strong optimism. He indicated that there were two more hikes planned for this year.

FINSUM: All the optimism comes across as quite hawkish despite Powell’s intentions to seem gradual. We appear to be on definite course higher.

(New York)

While Treasury yields, especially at the short end of the curve, have improved a great deal recently. Many investors may still be interested in adding some stocks with good dividends to their portfolios. With that in mind, pharma may be a great place to look. The sector is having a tough time this year—down over 6% to-date—but that means dividend yields are looking strong. The sector is averaging 2.9%, but the best payers are near 4%, including some big names. For instance, AbbVie and Pfizer are both yielding 3.7% or over, and both seem to have rock solid outlooks where that dividend is not going to shrink.

FINSUM: These seem to be some great choices. The risk here does not appear to be in the fundamentals, but more related to interest rates.

(New York)

Are you on the look out for income stocks? While their position in one’s portfolio is changing given rising rates, good income stocks, especially safe ones, are always of value. The S&P 500 is currently only yielding about 2%, which is now less than two-year Treasuries. However, one can find very strong stocks with 3-4% yields. Those include Target and Qualcomm, the latter of which is yielding 4.2% and is a very well-covered stock. Also check out Seagate, CenturyLink, Pitney Bowes, and Navient.

FINSUM: These picks come from what seems to be a very diligent dividend-focused manager that was recently profiled in Barron’s. Our big question is how much dividend stocks might suffer in a rising rate period.