Last week, the fact that yields around the world continued to collapse rocked Wall Street and the financial media. On Wednesday, Germany auctioned $3.72 billion in five-year bonds that yielded -0.08%. Many countries across the eurozone, including Austria, Denmark, Finland and the Netherlands, have followed suit.
While dropping yields are natural byproducts of the European Central Bank’s Quantitative Easing program, the fact is still somewhat shocking. Interestingly, these negative yields are not scaring away investors, but instead attracting those who are betting on a German economic rebound and an improving euro.
As far as I’m concerned, Janet Yellen has made investors a much better offer than the ECB. Last week, the Federal Reserve chairwoman testified before Congress and her comments were overwhelmingly dovish. Although Janet Yellen laid the ground work for a potential key interest rate hike later this year, hardly anyone expects the Fed to act while deflation is rampant.
Interestingly, a Fed interest rate hike is now being viewed as a partisan political issue, particularly after New York Senator Chuck Schumer urged “caution” with raising rates. Janet Yellen remarked that if the U.S. economy keeps improving, the Fed “will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis.”
Translated from Fed speak, Yellen hinted that the Fed is not seriously discussing raising key interest rates.
With interest rates collapsing abroad, and with the Fed staying the course at home, yield-seekers are left with few options. In my opinion, the only real opportunity is in domestic stocks that are not impacted by the strong dollar and pay a dividend to boot.
Notice that I didn’t include multinational companies as many multinationals are experiencing erratic sales and earnings growth due to the strong dollar. Many of last year’s popular dividend stocks — like Johnson & Johnson (NYSE:JNJ), McDonald’s Corporation (NYSE:MCD), Microsoft Corporation (NASDAQ:MSFT) and Procter & Gamble Co (NYSE:PG) — are feeling the pinch.
Keeping this in mind, I’ve been zeroing in on domestic companies with strong sales, big earnings and solid dividend yields. Stocks to buy include Altria Group Inc (NYSE:MO), Anthem Inc (NYSE:ANTM), HCP, Inc. (NYSE:HCP), L Brands Inc (NYSE:LB), Lowe’s Companies, Inc. (NYSE:LOW) and UnitedHealth Group Inc. (NYSE:UNH).
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
