Janet Yellen appeared to be squelching her more hawkish Federal governors on Tuesday as she laid out a more dovish outlook for interest rates. Her cautious tone is due to the global and financial uncertainties that are affecting the domestic economy.
The dovish stance is exactly what investors were looking for as the S&P 500 rallied strong through Tuesday afternoon carrying through Wednesday’s activity. While an amicable Yellen will help the broad market, there are more specific groups of stocks that historically benefit even more.
Historically, dividend stocks tend to rally faster than value and the rest of the market in lower interest rate environments. Much of this is because dividend stocks are still using capital markets for operating capital and lower rates equate to better margins.
This market presents an interesting twist. With interest rates so low that investors are migrating towards dividend yielding securities to generate income, the combination of dividend-yielding growth stocks becomes even more appealing.
For this reason, these three companies make our list of Stocks that love Janet Yellen.
Dividend Stocks That Love Janet Yellen: Altria Group Inc (MO)
Dividend Yield: 3.6%
Altria Group Inc (MO) stock makes our list for a number of reasons. First, most people know that a weaker economy tends to favor tobacco and beverage stocks as demand for their products remain robust. This makes itself clear in the continued growth of Altria’s top line revenue which has seen only one slight year-over-year decline (-0.1%) in the last two years.
Strong fundamentals have led to strong prices as Altria shares continue to leave the market in the dust. Year-to-date Altria has gained nearly 8% in total return and the stock is headed towards new all-time highs with a break above $63.
Lower interest rates will maintain a weaker dollar, helping their international revenue and lower rates to boost Altria’s balance sheet and maintain the attractiveness of the 3.6% dividend. Overall, Altria is the Federal Reserve’s monetary policy.
Dividend Stocks That Love Janet Yellen: The Coca Cola Co (KO)
Dividend Yield: 3%
Consumer staples stocks tend to thrive in weaker markets and The Coca Cola Co (KO) stock is living up to this expectation. Coca Cola shares have surged more than 8% in 2016 as the consumer discretionary trade is staying alive.
The company is focusing on their transitioning product lines as diet and other soda consumption continues to see declines, which has caused a decline on KO’s revenue. Despite the revenue drops, Coca Cola has been able to maintain earnings per share results that have outperformed analyst expectations.
Sentiment on KO is lackluster as 48% of the analysts tracking the stock have it ranked a buy, but this indicates that Coca Cola shares are far from the “crowded” status that typically weighs on a stock’s performance.
Coke shares are breaking to new all-time highs as the Fed’s dovish outlook benefits their stock in a number of ways, including making the 3% dividend attractive for any account.
Dividend Stocks That Love Janet Yellen: Verizon Communications Inc. (VZ)
Dividend Yield: 4.2%
Just when you think they’re done growing Verizon Communications Inc. (VZ) takes off again. This large cap growth stock boasts a hefty 4.2% dividend, which makes it an attractive alternative for income-generating portfolios.
But wait, there’s more!
Verizon has been on a growth tear over the last five years as they continue to build out networks and acquire AWS licenses, all of which are financed with lower rates when the Federal Open Market Committee holds things steady.
Technically, Verizon stock is performing as a best in breed among telecommunications and consumer stocks as it has racked-up an impressive 18% of gains year-to-date. The strong performance has shares pressing into new high territory, resulting in a strong buy rating from our technical models.
Sentiment towards Verizon stock is neutral, which is good for investors looking to grab the outperformer. Wall Street analysts are split on their recommendations with only 44% of those covering the stock rating it a buy. This leaves plenty of room for upgrades as Verizon stock continues to leave the market in its dust.
Janet Yellen’s comments this week have helped propel Verizon stock to new all-time highs this week and the neutral-to-dovish FOMC policy should add more fuel for a continued rally in Verizon stock.
As of this writing, Chris Johnson did not hold a position in any of the aforementioned securities.
