Eq: Large Cap
Barron’s has published an article presenting what it says are the best ten dividend stocks on the market. The picks come directly from Barron’s, not an outside manager, and try to choose stocks with great yields and nice prices. All the picks have yields between 2.4% and 4.3%, and generally have “above-market yields, below-market price/earnings ratios, and other favorable payout- and earnings-related characteristics”. The stock picks are as follows: Verizon Communications (ticker: VZ), MetLife (MET), AbbVie (ABBV), Dow Chemical (DOW), Qualcomm (QCOM), Cisco Systems (CSCO), Target (TGT), Carnival (CCL), JPMorgan Chase (JPM), and U.S. Bancorp (USB).
FINSUM: We like JP Morgan chase here. The bank is yielding 2.9% and looks favorable because of the increasing chance the Fed will hike rates, which will be good for financials. The bank also has a low dividend payout ratio, which might allow it to raise its dividend as rates rise, keeping it competitive (though regulations may limit this).
There has been a lot of bearish news out there in the last week, which is odd because some indicators say bullishness is peaking. Nonetheless, this article communicates Goldman’s picks of what you should buy to weather the rough period that may be ahead for stocks. The bank says that with valuations so high, risk-adjusted returns are where you should be focusing, and that companies that can increase their dividends as rates rise would also be a good bet. With that in mind, Goldman chooses Starbucks, Nike, Salesforce.com, and Visa as good risk-adjusted stocks, with Amgen and Corning as dividend plays, and Alphabet and Amazon, as good growth stocks.
FINSUM: This is an interesting mix of picks from Goldman. We particularly like the idea of stocks that can increase their dividends as rates rise, as this will mean they stay more competitive versus other high-paying investments.
Small cap stocks have been doing well this year, but there are still values to be had, says this piece. Many say the stocks may do well either in the face of a stronger Dollar or alongside increased trade protectionism. The stock picks here come from a small New Orleans-based manager that runs two mutual funds. The picks are iPhone supplier Skyworks Solutions (SWKS), UK cleaning specialist Steris (STE), and 401(k) robo advisor Financial Engines (FNGN). The manager likes stocks with modest debt and “plenty” of cash flow. The article features a discussion of each of the names.
FINSUM: These are some niche choices if you are used to large caps, but a good read if you are interested in adding some small caps to your portfolio.
Yesterday Bank of America put out a big warning that markets were set to fall, with a high degree of correlation between assets causing big losses. Now UBS has joined the chorus of bears, warning investors that the S&P 500 is showing signs that it might plunge in the near term. The bank says there will be a major correction in the next two months, driven by low inflation expectations and rising correlations with other asset classes, among other factors. UBS says the market has been buoyed this summer by rising hopes the Fed won’t hike, but that such hopes have not come alongside higher inflation expectations, which may indicate poor sentiment on the economy. UBS’ advice to investors was this: “As an investor we would use the current low volatility environment to buy protection and/or we would generally be a buyer of volatility particularly on the FX side and in gold, where it is very likely to see significant moves over the next few weeks!!”.
FINSUM: This is about as specific as a bearish article ever gets, as it includes both timing and causes for a predicted correction. Only time will tell if they are right, but certainly something to pay attention to.
Everyone knows that dividends have been very important to the stock markets this year. And while there is some evidence that investors may be starting to venture into more pro-risk and less income-oriented sectors of the market, this piece shows just how reliant on dividends the index has become. According to the piece the “five-year rolling correlation between S&P 500 companies’ dividend yield and the index’s performance has been at 0.80 or above for the five quarters through June”. For anyone who knows anything about statistics, that is a strong correlation, and shows just how much investors have stampeded into well-paying stocks alongside interest rates plunging.
FINSUM: We think this is a very illuminating article and we believe this trend will continue. The reason why is that the demographic shift across the developed world means there are more retirees who need income, and they definitely are not getting it from fixed income markets.
Source: Wall Street Journal
While the market might be starting to rotate in more aggressive sectors, there are likely still many investors chasing good income stocks. With that in mind, this Barron’s piece offers 5 dividend-rich stocks which it says you can hold for the long-term. The picks come from a successful balanced fund which currently has a 65% weighting towards equities. The picks are ~2% yielding Medtronic, 2.4% yielding U.S. Bancorp, 3.1% yielding Target, UnitedHealth Group, and 2.8% yielding UPS. The article includes a through discussion of each stock.
FINSUM: These are some diverse picks with a good argument behind each of them. We are particularly interested in UPS, as even though the transition to online retail has matured, there is probably still a lot of growth to be had in parcel shipping.