Market selloffs in the past few weeks were triggered by the plunge in oil prices, continuing U.S.-China trade war and the drop in technology and banking stocks. All of this has kept investors on edge, prompting a lookout for safe havens like dividend stocks.
Accordingly, this might be a good time to invest in a couple of decent income stocks to wait out the market turbulence.
What Are the Factors Weighing on the Markets?
Oil prices have been plummeting since early October, weighed down by an increase in supply and negative economic outlook threatening to pull consumption down. “Asian refiners and consumers we speak with are mentioning initial concerns of slowing demand,” Mike Corley, president of Mercatus Energy Advisors, said.
Oil prices are becoming increasingly chaotic, thanks to ramped up production around the globe and weakening demand, particularly from the developing economies.
Oversupply isn’t the only reason behind plummeting oil prices, a weakening demand is equally responsible for it. China, the second largest economy in the world and the largest importer of crude oil, is witnessing its economy in a very bad situation thanks to the ongoing trade war with the U.S. and Beijing’s steps to deleverage its own financial system.
President Donald Trump’s repeated tariff attacks on China since July for restricting American companies from operating freely in the Asian nation, intellectual property thefts and trade imbalance were equally reciprocated by the latter in the form of trade levies as well, escalating the trade dispute. And we all know that a potential trade war could easily hamper economic growth and squeeze corporate profits.
The recent drop in equity markets has also been due to the downward path taken by Apple’s (NASDAQ:AAPL) shares and a decline in bank shares. Apple’s supplier Lumentum (NASDAQ:LITE) cut its fiscal outlook for the current quarter, following the request by one of its suppliers to cut shipments. Since Apple is one of the largest suppliers of Lumentum, the news hit financial indexes hard.
Apple’s shares fell 2.8% on Nov. 14, and for a short time they traded below 20% of its all-time high, as it plunged into a bear market. The decline came after Guggenheim downgraded the technology stock and UBS cut its iPhone sales estimates.
The SPDR S&P Bank ETF (NYSEARCA:KBE) fell 1.9% on the same day, erasing previous gains after Democratic representative Maxine Waters said the Trump administration’s efforts to weaken bank regulations will end. Waters is set to take over the House Financial Services Committee when the new Congress assembles in January.
Why Invest in Dividend Stocks?
The market volatility induced by aforementioned factors has kept investors on edge. Therefore, it would be prudent to turn to dividend stocks for stability.
Dividend-offering stocks could be safe bets for investors when returns from financial markets are in jeopardy. Most dividend-yielding companies are financially stable with strong balance sheets, and are thus capable of generating periodic dividend payouts to their shareholders.
Such companies are strong enough to sustain through market turbulences, unfavorable geopolitical and economic instabilities by virtue of their diversified businesses, strong business models and global reach among other factors.
Dividend Stocks to Buy
We have hand-picked a few stocks to buy that carry a Zacks Rank #1 (Strong Buy) and offer higher dividends than their respective industries.
Black Stone Minerals (NYSE:BSM) is the owner of oil and natural gas mineral primarily in the United States. The company’s Zacks Consensus Estimate for earnings has risen 4.5% in the past 60 days. Black Stone Minerals has a dividend yield of 8.90% compared with the industry average of 7.94%. Its five-year average dividend yield is 6.04%.
Consol Coal Resources LP (NYSE:CCR) manages and develops active thermal coal operations. The company’s Zacks Consensus Estimate for earnings has advanced 2.1% in the past 60 days. CONSOL Coal Resources has a dividend yield of 11.05% compared with the industry average of 0.00%. Its five-year average dividend yield is 13.86%.
Arbor Realty Trust (NYSE:ABR) is a specialized real estate finance company investing in real estate-related bridge and mezzanine loans, preferred equity, mortgage-related securities and other real estate-related assets.
The company’s Zacks Consensus Estimate for earnings has increased 2.5% in the past 60 days. Arbor Realty Trust has a dividend yield of 7.90% compared with the industry average of 4.45%. Its five-year average dividend yield is 8.41%.
Armour Residential REIT (NYSE:ARR) invests primarily in residential mortgage-backed securities issued or guaranteed by a United States Government-chartered entity.
The company’s Zacks Consensus Estimate for earnings has risen 6.1% in the past 60 days. Armour Residential REIT has a dividend yield of 10.10% compared with the industry average of 8.48%. Its five-year average dividend yield is 13.33%.
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