Dodging the recent third-quarter earnings flood which has unveiled plenty of surprises and disappointments, investors can look up to companies paying higher dividends. The global economy and financial markets have been struggling with volatility over the last few months. Thus, in times of market uncertainty, it may be a great idea to focus on dividend-paying stocks as these act as a safe haven in bearish market conditions.
However, in addition to sizeable dividend yields, investors can also look at momentum stocks by inspecting price activity. This may help reflect the current interest in a stock, and whether buyers or sellers have the upper hand right now.
Market sentiments have not been smooth so far in 2015, given several macro headwinds. The decline in crude oil prices, uncertainty with respect to the timing of the Fed rate hike, and a slowdown in the Chinese economy were some major concerns.
China remains a big concern, owing to the dramatic devaluation of its currency and the oversupply of cheap exports from the country attracting international buyers and hurting domestic markets. We also anticipate a possible currency war or competitive devaluation following this, if the competing nations choose to artificially devaluate their currencies as well.
Though the U.S. Federal Reserve has kept the interest rate unchanged for the time being, according to the statement from the latest FOMC meeting, a raise in rates in December is in the cards. Moreover, according to recently released U.S. GDP data, the economy’s growth rate was 1.5% in the third quarter, down from 3.9% in the second due to inventory correction.
Also, with one-fifth of S&P 500 companies releasing their third-quarter results so far, no major surprises have been registered accompanied by lower revenue gains owing to the combined effect of a strong U.S. dollar and global growth challenges. The lack of noticeable growth, revenue weakness and downward estimate revisions are the three key takeaways for the third quarter so far. Moreover, moving into the fourth quarter, analysts once again foresee a bleak earnings picture.
In the face of such odds, investors should be very careful about their investing strategy.
When Dividend and Momentum Congregate
Dividend, when combined with momentum, can offer an opportunity to step into challenging markets.
A dividend is a distribution of a part of a company's earnings, decided by its board, to a class of its stockholders. It reflects part of a company’s net profits, and healthy dividend yields are directly proportional to attractive returns on investment in a stock. Thus, when a company decides to increase its dividend, it is a signal to investors that management is confident of the business’s prospects.
Momentum investors take short-term resort in stocks that are scaling up and tend to sell them as soon as they exhibit signs of a downtrend. Thus, choosing momentum stocks that also offer a decent dividend yield can be a good option for investors.
While there is a debate regarding the criteria to focus on while choosing momentum stocks, the new Zacks style score system identifies some price movement metrics to come up with the best stocks in this regard.
5 Dividend Stocks Gaining Momentum
We have picked 5 stocks that could be promising, given a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy), a dividend yield of greater than 3% and a momentum score of ‘A’ with the help of our new style score system.
Northern Tier Energy LP
Northern Tier Energy LP is an independent downstream energy company with refining, retail and pipeline operations that serve the PADD II region of the U.S. It operates its assets in two business segments: the refining business and the retail business.
The company has witnessed a rise of 3.6% in its current year estimates over the past one month. Alongside, upward price movements of 17.22% and 2.62% over the past four and twelve weeks, respectively, have rendered the stock a Momentum Score of ‘A.’
Further, this Zacks Rank #2 company offers a promising dividend yield of 17.72%.
NVE Corp. is a recognized leader in the practical commercialization of spintronics, which many experts believe represent the next generation of microelectronics. NVE's products include magnetic sensors and couplers which revolutionize data acquisition and transfer.
The company has witnessed a rise of 7.2% in its current year estimates over the past one month. Also, upward price movements of 27.78% and 6.31% over the past four and twelve weeks, respectively, have helped the stock gain a Momentum Score of ‘A.’
This Zacks Rank #2 company offers a promising dividend yield of 8.60%.
General Motors Company (GM - Free Report)
General Motors Company is engaged in the designing, manufacturing and retailing of vehicles globally, including passenger cars, crossover vehicles, and light trucks, sport utility vehicles, vans and other vehicles. Its business is organized into three geographically based segments – General Motors North America (GMNA), General Motors International Operations (GMIO) and General Motors Europe (GME).
The company has witnessed a rise of 5.3% in its current year estimates over the past one month. Alongside, upward price movements of 19.97% and 10.94% over the past four and twelve weeks, respectively, have rendered the stock a Momentum Score of ‘A.’
Further, this Zacks Rank #2 company offers a promising dividend yield of 4.14%.
Highwoods Properties Inc. (HIW - Free Report)
Highwoods Properties, Inc. is a fully integrated, self-administered real estate investment trust that provides leasing, management, development, construction and other customer-related services for its properties and to third parties. The company owns or has an interest in office, industrial, retail and service center properties, including development projects and apartment units.
The company has witnessed a rise of 1% in its current year estimates over the past one month. Also, upward price movements of 11.72% and 2.94% over the past four and twelve weeks, respectively, have rendered the stock a Momentum Score of ‘A.’
This Zacks Rank #2 company offers a promising dividend yield of 3.87%.
Crown Castle International Corp. (CCI - Free Report)
Crown Castle International Corp. operates as a real estate investment trust. It owns, operates, and leases shared wireless infrastructure primarily in the U.S. and Australia. The company provides towers and other structures, such as rooftops and distributed antenna systems and small cells. It provides access, including space or capacity to its towers, small cells, and third-party land interests via long-term contracts in various forms, including license, sublease, and lease agreements. It also offers network services.
The company has witnessed a rise of 1.4% in its current year estimates over the past one month. Alongside, upward price movements of 10.64% and 4.61% over the past four and twelve weeks, respectively, have helped the stock gain a Momentum Score of ‘A.’
Also, this Zacks Rank #2 company offers a promising dividend yield of 3.83%.
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