We are in the midst of turbulent times to be sure. And it could be that investing moves that worked previously won’t work any longer. But that’s nothing new for the markets. Good investors need to be adaptable and transition to new strategies when necessary. The challenge now is, what is the new direction? And I’d like to look at financial stocks today.
There’s a split between the economic news and the markets reaction lately, and it’s hard to tell which one will win out in the end. Likewise, there are pundits making predictions for both rallies and routs.
In these situations, the smart thing to do is not take sides, but start to build from the middle. That means good stocks that have growth potential but will also pay you regardless of the market’s ups and downs.
I’m no fan of the big banks, with their “creative accounting” practices. But these other seven financial stocks with dividends to bank on are rock-solid companies that will deliver in good and bad times. In Growth Investor, I always recommend a healthy weighting in growth stocks that also pay a decent yield, to help “smooth out” your portfolio returns long-term. My picks here are:
- Cohen & Steers (NYSE:CNS)
- ServisFirst Bancshares (NASDAQ:SFBS)
- Ares Management (NYSE:ARES)
- Legg Mason (NYSE:LM)
- New York Community Bancorp (NYSE:NYCB)
- Carlyle Group (NYSE:CG)
- BlackRock (NYSE:BLK)
Below I’ll explain what makes each of these financial stocks worth watching.
Financial Stocks to Buy: Cohen & Steers (CNS)
Launched in 1986, CNS is a global investment management company that focuses on real assets — like real estate, listed infrastructure (like airports, sea ports, power grids, phone towers, etc), commodities, natural resource equities and preferred securities.
Basically, CNS buys interests in these sectors, bundles them and then sells those packages to institutional investors or to retail customers. On its most fundamental level, retail investors see CNS as a boutique mutual fund company. But its focus means it can package its assets to suit the needs of institutional and high net worth investors as well.
The stock has had a bumpy 2020, but it’s up over 20% in the past 12 months and delivers a reliable 2.6% dividend on top of that.
ServisFirst Bancshares (SFBS)
This Alabama-based regional bank operates in four neighboring southern states as well as its home state. It has $9 billion in assets.
Given the mess that Covid-19 has created with the economy, regional banks have been on the short end of the stick — potential lease, loan and mortgage defaults — as well as the long end — CARES Act processing commissions and Federal Reserve help.
That mixed bag spells uncertainty with investors however, and SFBS has been the worse for wear in 2020. It’s off 14% year to date and 2% in the past year. But it has been sold off because the sector is out of favor, not for any of its own problems.
This is a solid bank and this is a good time get in cheap. It also has a solid 2.3% dividend, which helps buy some time. That’s a better yield than some of my absolute favorite growth & income plays now, like the A.I. Master Key.
Ares Management (ARES)
This is a West Coast investment management firm that launched in 1997 and is based in Los Angeles.
Usually that means it takes advantage of opportunities in West. And given the fact that California is a fifth largest economy in the world, it has plenty of options.
The company is split into three divisions: Credit Group, Private Equity Group and Real Estate Group. Basically, each group makes investments in assets within their parameters and then bundles those assets into funds. It then sells shares of those funds to retail and institutional clients.
While the investment landscape is in flux, this is a very good time for smart firms like ARES. Since valuations are unclear, it’s a good time seek undervalued assets and build positions in once overvalued sectors.
ARES is up 29% in the past 12 months and off 3% year to date. Its generous 4.8% dividend is a great reward for long-term investors.
Legg Mason (LM)
This Baltimore, Maryland-based firm has been around since 1981. It’s one of the second wave of brokerage firms that has been working with retail and institutional clients for decades.
While most retail investors view the current market as a mess, brokerage firms are more agnostic when it comes to bulls and bears. I view asset managers as a growth and income opportunity for Growth Investor, and volatility is what creates opportunity for them. After all, many institutional clients hedge across different markets and sectors during volatile times, so that’s more transactions for LM.
It has also built a good business offering mutual funds, ETFs, closed-end funds and money markets as well.
The financial stock is up 41% in the past year, and 39% year to date. It’s thriving in these market conditions. And it has a reliable 3.2% dividend on top of it all.
New York Community Bancorp (NYCB)
With $54 billion in assets and service in five states — New York, Ohio, Florida, New Jersey, and Arizona — is the largest thrift depositories in the US.
Thrifts are designed to help consumers rather than businesses and they have access to the Federal Home Loan Bank System, which helps them offer higher interest rates on cash accounts.
What’s more, its charter — when it was founded — goes back to 1859. That means it has seen a lot of turbulent times — Civil War, a number major depressions, two world wars, etc — and has not only endured, but has grown significantly.
But like most financial stocks these days, NYCB is getting painted with a broad brush. It is in good shape and will come back strong. Right now, it’s off 11% in the past year, and 23% year to date. The upside is, it’s delivering a 7.6% dividend right now.
Carlyle Group (CG)
CG is a Washington, D.C.-based global alternative asset management company. That means it invests in a variety of assets through its divisions and then gives its clients access to those opportunities. It may be directly investing in a company, or a wind farm or financing for a pipeline.
Founded in 1987, its co-founder and co-executive chairman David Rubenstein is a well respected investor and leader. He was just interviewed on Bloomberg earlier this week about the current investment climate. In late April it reported a loss for Q1 and withdrew earnings forecasts moving forward, but that’s been par for the course for the sector.
The company has plenty of “dry powder” according to Rubenstein, which means they are ready to invest when the smoke clears. It also means they’re not sitting on a bunch of assets without any cash backstop. I would absolutely demand a strong cash position in this environment for Growth Investor buys and any other stocks you might be considering.
The stock is up 11% for the year and off 27% year to date. It’s a long-term stock and maintains a long-term vision. It also has a generous 5.3% dividend.
BLK is the world’s largest asset manager, with $7.4 trillion in assets under management at the end of 2019.
This is why the Federal Reserve has linked up with BlackRock to help manage the disbursements of money to other financial institutions and other lenders. That is a great partner to have these days and is a clear endorsement of the power and skills that BLK have.
If you’re familiar with iShares ETFs, that’s also a BlackRock division, so this firm is a major player across retail, institutional and governmental clients.
The stock is up 13% in the past year, and about 3% year to date. But its 2.8% dividend pushes it further into the green year to date and is a steady friend, year in and year out.
As I’ve mentioned, though, financial companies are only one example of where growth and income investments are to be found. I’ve got another example that might surprise you: artificial intelligence (A.I.)
The AI Master Key
If artificial intelligence sounds futuristic, even far-fetched — well, keep in mind, you’re already using it every day. If you’ve ever used Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Assistant or Apple’s (NASDAQ:AAPL) Siri … if you’ve had Netflix (NASDAQ:NFLX) recommend a movie or Zillow (NASDAQ:Z) recommend a house … even creating an email spam filter — then you’ve used artificial intelligence.
In this new world of AI everywhere, data becomes a hot commodity.
As scientists find even more applications for artificial intelligence — from hospitals to retail to self-driving cars — it’s incredible to imagine how much data will be involved.
To create AI programs in the first place, tech companies must collect vast amounts of data on human decisions. Data is what powers every AI system. As one AI researcher from the University of South Florida puts it, “data is the new oil.”
To cash in, you’ll want the company that makes the “brain” that all AI software needs to function, spot patterns, and interpret data.
It’s known as the “Volta Chip” — and it’s what makes the AI revolution possible. Even better, its stock has been a “strong buy” in my Portfolio Grader for weeks despite market volatility.
You don’t need to be an AI expert to take part. I’ll tell you everything you need to know, as well as my buy recommendation, in my special report for Growth Investor, The A.I. Master Key. The stock is still under my buy limit price — so you’ll want to sign up now. That way, you can get in while you can still do so cheaply.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.