Eq: Large Cap

(New York)

Anyone paying any attention to the economy or markets knows dividends are in trouble. With the economy set to shrink 30% in Q2 and a likely big negative growth number for the year, companies are going to have a very hard time maintaining profitability and dividend levels. With that said, here are some stocks that should have safe dividends. Texas Instruments and CVS both look attractive, yielding 3.6% currently, as does Intel (which yields 2.5%).


FINSUM: The brightest news for investors is that many companies have announced a suspension of buybacks but have plans to maintain their dividend, so there should still be some decent income.

(New York)

Many have been wondering when junk bonds were going to start feeling pain. Despite the previous risk of recession, junk bonds did quite well over the last several months. However, since the big flare up over coronavirus, they have started to be seriously wounded. On Friday, junk bond spreads to Treasuries were at 366 bp—very low. As of yesterday, they were at 418 basis, a 50bp+ rise in two trading days, showing how much investors fear the economic impact of coronavirus.


FINSUM: We think these spreads are going to keep moving higher, even if stocks level out. Bond investors are a suspicious bunch and an economic slowdown would hit high yield companies harder than average.

(New York)

Everyone has heard of the “Dogs of the Dow”, or the strategy of buying the laggards of the Dow. It is has been of the few highly successful value-based strategies over the last decade. If you have liked the Dogs of the Dow approach then check out “Fast Dogs”, which could be a good strategy. The idea is to buy the ten stocks with the fastest dividend growth in the Dow. The strategy has performed well in the last three years and just edged out the S&P 500’s performance (it is hard to track it further because dividend growth rate data is historically spotty). What will likely make this strategy successful is that companies with rising dividend growth are naturally signaling improvement and a brighter future, so an increasingly optimistic outlook is de facto. And of course, investors love dividends.


FINSUM: We like this idea. It would probably work better in rising rate markets, but generally speaking it seems like a smart approach in any environment.

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