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Dividend stocks are always the investors’ darling as they provide steady income and act as a shield against market risks. These stocks are generally less volatile in nature and hence are dependable when it comes to long-term investment planning. Moreover, in a low interest rate environment, dividend paying stocks offer substantial yields on a regular basis.
Threats to the Market
For some time now, the markets have been weighed down by a number of macroeconomic factors. These included the slump in the commodities market, particularly oil and a strengthening greenback. Moreover, speculations regarding a possible rate hike by the Fed, doubt about employment growth and uncertainty concerning UK’s referendum to decide whether it should exit the European Union kept investors on the edge.
And on top of it all, the presidential elections scheduled this year are driving the currency market haywire. Any fluctuation in the foreign exchange market will adversely impact the equity markets as well.
Before we delve into the dividend paying stocks that are ideally suited for this erratic market environment, let’s take a closer look at a couple of key factors influencing the stock market.
Rate Hike by Fed
On Jun 6, the Federal Reserve Chair Janet Yellen while providing an economic outlook asserted, "I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones."
Though it is most likely that there will be no rate hike in June, her stress on the positive aspects of the current economic data hints toward a lift-off in the upcoming months.
Following the Fed’s quarter point rate hike last December, which marked the first instance in nearly 10 years, U.S. stocks took a beating. A similar reaction can well be expected if another rate hike hits the market.
Employment Growth
The job report for May released recently was disappointing to say the least with the economy adding just 38,000 jobs and the unemployment rate falling to 4.7%. This was way below the month’s employment growth expectation of 162,000 and the unemployment rate of 5%.
Weak employment growth also damages consumer confidence. As a result, spending levels that have been one of the bright spots driving the U.S. recovery might be affected.
How to Pick the Right Stocks?
In this context, though the benefits of dividend investing cannot be overstressed, it is prudent to keep in mind that every company cannot keep up with its dividend paying momentum. Hence, a cautious strategy needs to be followed in order to help investors pick the best dividend stocks that assure steady returns.
It is hard to choose the right dividend stocks as it requires considering both the past performance of the company and its future prospects. If a stock has delivered strong performance in the past, but faces troubled times ahead, it should definitely not qualify as an investable pick.
We note that an impressive current-year dividend yield and a strong dividend yield history are also important criteria for identifying strong dividend stocks.
We have picked five stocks that offer a dividend yield of more than 3% and boast a favorable Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy), with percentage rating of Strong Buy/Buy over 85%.
Orchid Island is a finance company that invests in residential mortgage-backed securities. The principal and interest payments of this company are guaranteed by a U.S. government agency or a U.S. government-sponsored entity.
Orchid Island carries a Zacks Rank #2 and currently offers a dividend yield of 16.11%. The company’s 5-year historical dividend growth rate is 15.79%.
Saratoga Investment is a finance company that invests mainly in leveraged loans and mezzanine debt issued by U.S. middle-market companies, both through direct lending and participation in loan syndicates.
This Zacks Rank #2 stock currently has an impressive dividend yield of 9.95%. The company’s 5-year historical dividend growth rate is 3.3%.
Ciner Resources LP
Ciner Resources is a master limited partnership that produces natural soda ash. It runs a trona ore mining and soda ash production business primarily in the Green River Basin of Wyoming.
Ciner Resources carries a Zacks Rank #2 and currently has a robust dividend yield of 7.95%. The partnership’s 5-year historical dividend growth rate is 7.31%.
Armada Hoffler is a real estate investment trust. It is engaged in developing, building, owning and managing office, retail and multifamily properties primarily in the U.S.
Armada Hoffler carries a Zacks Rank #2 and currently has a dividend yield of 5.61%. The company’s 5-year historical dividend growth rate is 5.88%.
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5 Dividend Stocks to Buy Right Now
Dividend stocks are always the investors’ darling as they provide steady income and act as a shield against market risks. These stocks are generally less volatile in nature and hence are dependable when it comes to long-term investment planning. Moreover, in a low interest rate environment, dividend paying stocks offer substantial yields on a regular basis.
Threats to the Market
For some time now, the markets have been weighed down by a number of macroeconomic factors. These included the slump in the commodities market, particularly oil and a strengthening greenback. Moreover, speculations regarding a possible rate hike by the Fed, doubt about employment growth and uncertainty concerning UK’s referendum to decide whether it should exit the European Union kept investors on the edge.
And on top of it all, the presidential elections scheduled this year are driving the currency market haywire. Any fluctuation in the foreign exchange market will adversely impact the equity markets as well.
Before we delve into the dividend paying stocks that are ideally suited for this erratic market environment, let’s take a closer look at a couple of key factors influencing the stock market.
Rate Hike by Fed
On Jun 6, the Federal Reserve Chair Janet Yellen while providing an economic outlook asserted, "I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones."
Though it is most likely that there will be no rate hike in June, her stress on the positive aspects of the current economic data hints toward a lift-off in the upcoming months.
Following the Fed’s quarter point rate hike last December, which marked the first instance in nearly 10 years, U.S. stocks took a beating. A similar reaction can well be expected if another rate hike hits the market.
Employment Growth
The job report for May released recently was disappointing to say the least with the economy adding just 38,000 jobs and the unemployment rate falling to 4.7%. This was way below the month’s employment growth expectation of 162,000 and the unemployment rate of 5%.
Weak employment growth also damages consumer confidence. As a result, spending levels that have been one of the bright spots driving the U.S. recovery might be affected.
How to Pick the Right Stocks?
In this context, though the benefits of dividend investing cannot be overstressed, it is prudent to keep in mind that every company cannot keep up with its dividend paying momentum. Hence, a cautious strategy needs to be followed in order to help investors pick the best dividend stocks that assure steady returns.
It is hard to choose the right dividend stocks as it requires considering both the past performance of the company and its future prospects. If a stock has delivered strong performance in the past, but faces troubled times ahead, it should definitely not qualify as an investable pick.
We note that an impressive current-year dividend yield and a strong dividend yield history are also important criteria for identifying strong dividend stocks.
We have picked five stocks that offer a dividend yield of more than 3% and boast a favorable Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy), with percentage rating of Strong Buy/Buy over 85%.
Orchid Island Capital, Inc. (ORC - Free Report)
Orchid Island is a finance company that invests in residential mortgage-backed securities. The principal and interest payments of this company are guaranteed by a U.S. government agency or a U.S. government-sponsored entity.
Orchid Island carries a Zacks Rank #2 and currently offers a dividend yield of 16.11%. The company’s 5-year historical dividend growth rate is 15.79%.
Saratoga Investment Corp. (SAR - Free Report)
Saratoga Investment is a finance company that invests mainly in leveraged loans and mezzanine debt issued by U.S. middle-market companies, both through direct lending and participation in loan syndicates.
This Zacks Rank #2 stock currently has an impressive dividend yield of 9.95%. The company’s 5-year historical dividend growth rate is 3.3%.
Ciner Resources LP
Ciner Resources is a master limited partnership that produces natural soda ash. It runs a trona ore mining and soda ash production business primarily in the Green River Basin of Wyoming.
Ciner Resources carries a Zacks Rank #2 and currently has a robust dividend yield of 7.95%. The partnership’s 5-year historical dividend growth rate is 7.31%.
Braskem S.A. (BAK - Free Report)
Braskem is the largest petrochemical operation in Latin America and is counted among the five largest private companies in Brazil.
Sporting a Zacks Rank #1, Braskem currently has a dividend yield of 5.59%. The company’s 5-year historical dividend growth rate is 3.55%.
Armada Hoffler Properties, Inc. (AHH - Free Report)
Armada Hoffler is a real estate investment trust. It is engaged in developing, building, owning and managing office, retail and multifamily properties primarily in the U.S.
Armada Hoffler carries a Zacks Rank #2 and currently has a dividend yield of 5.61%. The company’s 5-year historical dividend growth rate is 5.88%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>