Markets have just enjoyed their best week year to date and investors may be gearing up to bet on growth stocks. Starting with retail sales data for January, several economic reports have also been encouraging. Yet, the Fed remains wary about raising rates and global concerns continue to linger on the horizon.
January wasn’t the kindest month for stocks in some time. In such a situation, it may be difficult to find stocks that have found the going mostly smooth sailing. But we can still select beaten down stocks with strong dividend yields. Picking such stocks could help to fortify your portfolio in case stocks hit rough waters again.
The Dow and the S&P 500 advanced 2.6% and 2.9%, respectively, the highest gains since Nov 20. Additionally, the Nasdaq jumped 3.9%, its highest increase since mid-July. Markets ended a holiday-shortened week in the green following rallies over each of the first-three sessions. Stocks ended Friday mostly flat.
Despite declining more than 20% over the last five days, the market’s fear gauge, the VIX, remains above 20. This indicates that downside fears still lurk among investors. Additionally, the VIX is 12.7% higher year to date. One of the major reasons for the week’s gains was heightened possibilities that major oil exports would hold production at current levels.
Familiar Concerns Linger
This means that fears that have dogged markets in recent times continue to dominate proceedings. A demand supply gap has depressed oil prices for some time now. This in turn has acted as a drag on the broader markets. Despite recent meetings, major oil producing countries have yet to announce a comprehensive agreement on output cuts.
Concern about China’s economy is the other major factor which has hindered the resurgence of the markets. Despite a recent economic report indicating that liquidity in the economic system has increased, this is mostly transitory in nature and related to specific steps the government has taken to increase liquidity ahead of the New Year holidays. On the whole, the country’s economic outlook continues to be worrying.
Despite recent gains, stocks remain vulnerable to external shocks and domestic economic concerns. This is why it would be a good idea to pick stocks which provide strong dividend yields. At the same time, it would be unwise to ignore stocks which are beaten down and yet have strong fundamentals.
A regular flow of dividends ensures that a steady income flow is generated even if stocks are beaten down. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Amgen Inc. (AMGN - Free Report) is one of the leading biotechnology companies in the world, with extensive manufacturing, distribution and sales facilities.
Amgen has a Zacks Rank #1 (Strong Buy) and projected growth for the current year is 3.7%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.95. Its earnings estimate for the current year has improved 0.5% over the last 30 days. The stock has lost 7.5% year to date and has a dividend yield of 2.7%
CVR Refining, LP (CVRR - Free Report) is engaged in the refining and marketing of petroleum primarily in the United States.
CVR Refining has a Zacks Rank #2 (Buy) and expected earnings growth of 13.6% for the current year. It has a P/E (F1) of 4.18, lower than the industry average of 10.20. The stock has lost 12.4% year to date and has a dividend yield of 36.7%.
Essex Property Trust Inc. (ESS - Free Report) is a REIT engaged in the acquisition, development, redevelopment and management of multifamily residential properties in supply constrained markets.
Essex Property Trust has a Zacks Rank #2 and expected earnings growth of 11.6% for the current year. Its earnings estimate for the current year has improved 0.6% over the last 30 days. The stock has lost 13.5% year to date and has a dividend yield of 2.8%.
Avalonbay Communities Inc. (AVB - Free Report) is a REIT primarily focusing on developing multifamily apartment communities for higher-income clients in high barrier-to-entry regions of the U.S.
Avalonbay Communities has a Zacks Rank #2 and expected earnings growth of 10% for the current year. Its earnings estimate for the current year has improved 0.5% over the last 30 days. The stock has lost 7.6% year to date and has a dividend yield of 2.9%.
Willis Towers Watson Public Limited Co. (WLTW - Free Report) is a leading global advisory, broking and solutions company.
Willis Towers Watson has a Zacks Rank #2 and expected earnings growth of 25.1% for the current year. It has a P/E (F1) of 13.80, lower than the industry average of 18.90. Its earnings estimate for the current year has improved 3% over the last 30 days. The stock has lost 10.3% year to date and has a dividend yield of 3%.
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