Construction sector has been reeling under supply-chain blockages, rising mortgage rates, accelerating home prices, labor market constraints and inflationary pressure. Specially, rising interest rates — thanks to the Federal Reserve or Fed’s aggressive push to control inflation — have dented the residential construction market. Challenges in the housing industry also persist in the form of low supply levels and an upsurge in input prices. Dividend stocks from the construction industry like Patrick Industries, Inc. ( PATK Quick Quote PATK - Free Report) , PotlatchDeltic Corporation ( PCH Quick Quote PCH - Free Report) , Masco Corporation ( MAS Quick Quote MAS - Free Report) and Thor Industries, Inc. ( THO Quick Quote THO - Free Report) that regularly boost payouts offer a breather, especially with higher inflation, supply-chain disruptions and concerns about global growth weighing on the U.S. economic outlook. Need for Defensive Stocks
The 30-year, fixed-rate mortgage averaged 5.89% for the week ending Sep 8, up 23 basis points from 5.66% the previous week, according to Freddie Mac. That’s the highest the long-term rate has been since November 2008. The rate was 2.88% a year ago.
While remaining “strongly committed” to combating inflation, the Fed has raised rates four times since March, with a 75-basis point increment at each of its last two meetings. Per Fed officials’ latest hawkish comments, the central bank of the United States is likely to raise the benchmark rate by 75 basis points this month in order to more effectively address persistent inflation. Home sales have steadily decreased in recent months and the latest mortgage application data depicts a further gloomy picture for the housing market. Mortgage applications declined 0.8% for the week ended Sep 2. amid rising mortgage rates, while homebuilder confidence fell for the eighth consecutive month in August. Buyers are increasingly becoming vigilant amid no signs of falling rates and home prices in the near term, indicating that the housing downturn is likely to persist. Amid this volatility, growing concerns over economic disappointments and the Fed’s hawkish stance have kept the stocks in check. On the positive side, improvements in manufacturing and infrastructural activities have been compensating for the low contribution of housing to the sector’s performance. Solid demand for infrastructure services throughout end markets in both the private and public sectors has been giving some respite to investors interested in the construction market. Construction service providers have been gaining from strong global trends in infrastructure modernization, energy transition and national security investments. A significant boost in infrastructural and public construction spending to underscore the need for rebuilding the nation’s deteriorating roads and bridges and funding new climate resilience and broadband initiatives is a boon for the construction players. As evident from overall construction activities, stocks have been swinging back and forth this year. With uncertainty dominating the markets, dividend investing has emerged as one of the most popular investing themes. Dividend-paying stocks are non-cyclical, i.e., their performance is not linked to the larger economy. Moreover, the fact that these companies consistently raise dividend payouts reflects their confidence in their earnings growth potential. With the help of the Zacks Stock Screener, we have selected four construction stocks that have a Zacks Rank #2 (Buy) or 3 (Hold) with a dividend yield more than or equal to 2% and a five-year historical dividend growth greater than or equal to 2%. Moreover, these stocks’ payout ratio is less than 60, reflecting enough room for future dividend increases. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here The combination is a compelling one for investors who are looking for long-term income based on stability amid volatility. Winning Picks Patrick Industries: Based in Elkhart, IN, Patrick Industries is a leading component solutions provider for the RV, marine, and manufactured housing industries. The company pays out a quarterly dividend of 33 cents ($1.32 annualized) per share, giving a 2.61% yield at the current stock price. ( Check PATK’s dividend history here) PATK’s payout ratio is 9, with a five-year dividend growth rate of 13.81%. It has a market cap of $1.2 billion and currently carries a Zacks Rank #2. Patrick Industries, Inc. Dividend Yield (TTM) PotlatchDeltic: This Real Estate Investment Trust (REIT) with acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi pays out a quarterly dividend of 44 cents ($1.76 annualized) per share, giving a 3.76% yield at the current stock price. ( Check PotlatchDeltic’s dividend history here) PCH’s payout ratio is 31, with a five-year dividend growth rate of 2.15%. It has a market cap of $3.2 billion and currently carries a Zacks Rank #3. Potlatch Corporation Dividend Yield (TTM) Masco: Headquartered in Taylor, MI, Masco manufactures, sells and installs home improvement and building products. The company pays out a quarterly dividend of 28 cents ($1.12 annualized) per share, giving a 2.2% yield at the current stock price. ( Check MAS’ dividend history here) MAS’ payout ratio is 30, with a five-year dividend growth rate of 23.83%. It has a market cap of $11.5 billion and currently carries a Zacks Rank #3. Masco Corporation Dividend Yield (TTM) Thor Industries: Based in Elkhart, IN, Thor is the largest manufacturer of RVs globally and pays out a quarterly dividend of 43 cents ($1.72 annualized) per share, giving a 2.17% yield at the current stock price. ( Check THO’s dividend history here) THO’s payout ratio is 9, with a five-year dividend growth rate of 4.08%. It has a market cap of $4.3 billion and currently carries a Zacks Rank #3. Thor Industries, Inc. Dividend Yield (TTM)