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As U.S. presidential elections draw closer, apprehension surrounding the outcome is looming large. The close fight for the seat has unnerved investors, with stocks taking a hit. The Federal Reserve, meantime, is likely not to meddle with election uncertainties. The Fed is largely expected to keep rates unchanged in November, while the pace of rate hike seems to be slow in the near term.
With election triggering volatility, investing in dividend aristocrats seems to be prudent. These stocks provide higher total returns with lower volatility, which are undoubtedly the ‘holy grail’ of investing. The Fed’s reluctance in raising rates should also stand in good stead for such companies.
Election Induced Volatility
The presidential race between Democratic nominee Hillary Clinton and Republican candidate Donald Trump is getting intense by the day. Following the heated third and final election debate, media hailed Clinton as a winner, as has been indicated by the opinion polls (read more: Clinton's Odds of Winning Presidency High: Top 5 Picks).
But, FBI’s probe into the uncovered emails by Clinton has narrowed her chances of winning the race to the White House. An ABC News/Washington Post tracking poll showed that Trump has 46% support to Clinton’s 45%, while RealClearPolitics polling average clearly demonstrated the narrowing of Clinton’s lead to 2.2 percentage points from more than 7 points two weeks ago. Investors for quite sometime have largely priced in a Clinton victory and never really expected the outcome to be so much closer (read more: Portfolio Strategy for 2016 Presidential Election).
VIX Scales Higher
Election fears have finally caught up with investors, with the CBOE Volatility Index soaring 8.8% to 18.56 on Nov 1, its highest since June. VIX has advanced over the past six trading sessions after it was suppressed for most of October.
U.S stocks are looking vulnerable, with the S&P 500 falling below its 50 and 100-day moving averages. The benchmark index has now tanked for the sixth consecutive session and is now hovering near its four-month low.
Stocks tend to decline when the VIX ticks up. In fact, volatility is expected to be higher this election period than throughout next year. This is because the estimated volatility of a securities price that expire by the end of election week is currently higher than all other expiration dates going out to December 2017, according to Credit Suisse Group AG .
Fed Probably Won’t Raise Rates
The last thing the Fed wants is more gyrations in the stock market. A rate hike this month will certainly make investors edgy and risk a market plunge. Wall Street has placed a meagre 7% chance of a rate hike today, according to the CME Group. Investors are, instead, eyeing for a rate hike next month as it is six weeks after the election and the Fed could wait longer to see how the economy shapes up.
Further, a press conference isn’t scheduled after the Fed meeting. Such a conference is required so that Fed Chairwoman Janet Yellen could explain the Fed’s decision. This convinces us further that chances of a rate hike are feeble this month.
The Fed had said that it will raise rates four times this year. However, such claims have been reduced to one rate hike. The pace of a rate hike also seems to be slow as the U.S. two-year government bond yield remains below 1%. Meanwhile, the short-term Treasury bond yield is more policy-sensitive.
5 Top Dividend Aristocrats to Buy Now
The likelihood of a slower rate hike when compared to market expectations make dividend paying stocks more tempting. Meantime, the future is cast into uncertainty, thanks to the upcoming presidential elections. This also calls for investing in these stocks as they have tremendous financial strength and are immune to market vagaries.
But, why dividend aristocrats? This category of stocks outperforms other dividend payers on better quality business. Needless to say, these stocks reflect solid financial structure and healthy underlying fundamentals. They have also raked in excellent risk-adjusted returns over the last decade. In fact, this year, the S&P High Yield Dividend Aristocrats Index has rallied 9.5%, way above the S&P 500’s 3.3%.
Hence, we have selected five such dividend aristocrats to boost your returns. Such stocks also possess a Zacks Rank #2 (Buy). The favorable Zacks Rank should help these stocks gain further this year as well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medtronic plc (MDT - Free Report) manufactures and sells device-based medical therapies worldwide. The company has raised its dividend annually for the past 39 consecutive years. The company has a dividend yield of 2.1%, compared with the industry average of 0%. Its five-year average dividend yield is pegged at 2.09%.
Sysco Corporation (SYY - Free Report) markets and distributes a range of food and related products. The company has increased its dividend payments for 44 consecutive years. It has a dividend yield of 2.58%, compared with the industry average of 0%. Its five-year average dividend yield is 3.21%.
Pepsico, Inc. (PEP - Free Report) operates as a food and beverage company worldwide. The company has paid increasing dividends for 43 consecutive years. It has a dividend yield of 2.81%, compared with the industry average of 0%. Its five-year average dividend yield is 2.87%.
McDonald's Corp. (MCD - Free Report) operates and franchises McDonald's restaurants. The company's restaurants offer various food products, soft drinks, coffee, and other beverages. McDonald’s has raised its dividend each year for the past 40 years. The company has a dividend yield of 3.16%, compared with the industry average of 0%. Its five-year average dividend yield is 3.2%.
Chevron Corporation (CVX - Free Report) engages in integrated energy, chemicals, and petroleum operations worldwide. The company has raised its dividend payments for 28 consecutive years. It has a dividend yield of 4.09%, compared with the industry average of 3.07%. Its five-year average dividend yield is 3.71%.
Confidential from Zacks
This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today's Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public. Simply click here>>.
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5 Best Dividend Aristocrats to Buy in November
As U.S. presidential elections draw closer, apprehension surrounding the outcome is looming large. The close fight for the seat has unnerved investors, with stocks taking a hit. The Federal Reserve, meantime, is likely not to meddle with election uncertainties. The Fed is largely expected to keep rates unchanged in November, while the pace of rate hike seems to be slow in the near term.
With election triggering volatility, investing in dividend aristocrats seems to be prudent. These stocks provide higher total returns with lower volatility, which are undoubtedly the ‘holy grail’ of investing. The Fed’s reluctance in raising rates should also stand in good stead for such companies.
Election Induced Volatility
The presidential race between Democratic nominee Hillary Clinton and Republican candidate Donald Trump is getting intense by the day. Following the heated third and final election debate, media hailed Clinton as a winner, as has been indicated by the opinion polls (read more: Clinton's Odds of Winning Presidency High: Top 5 Picks).
But, FBI’s probe into the uncovered emails by Clinton has narrowed her chances of winning the race to the White House. An ABC News/Washington Post tracking poll showed that Trump has 46% support to Clinton’s 45%, while RealClearPolitics polling average clearly demonstrated the narrowing of Clinton’s lead to 2.2 percentage points from more than 7 points two weeks ago. Investors for quite sometime have largely priced in a Clinton victory and never really expected the outcome to be so much closer (read more: Portfolio Strategy for 2016 Presidential Election).
VIX Scales Higher
Election fears have finally caught up with investors, with the CBOE Volatility Index soaring 8.8% to 18.56 on Nov 1, its highest since June. VIX has advanced over the past six trading sessions after it was suppressed for most of October.
U.S stocks are looking vulnerable, with the S&P 500 falling below its 50 and 100-day moving averages. The benchmark index has now tanked for the sixth consecutive session and is now hovering near its four-month low.
Stocks tend to decline when the VIX ticks up. In fact, volatility is expected to be higher this election period than throughout next year. This is because the estimated volatility of a securities price that expire by the end of election week is currently higher than all other expiration dates going out to December 2017, according to Credit Suisse Group AG .
Fed Probably Won’t Raise Rates
The last thing the Fed wants is more gyrations in the stock market. A rate hike this month will certainly make investors edgy and risk a market plunge. Wall Street has placed a meagre 7% chance of a rate hike today, according to the CME Group. Investors are, instead, eyeing for a rate hike next month as it is six weeks after the election and the Fed could wait longer to see how the economy shapes up.
Further, a press conference isn’t scheduled after the Fed meeting. Such a conference is required so that Fed Chairwoman Janet Yellen could explain the Fed’s decision. This convinces us further that chances of a rate hike are feeble this month.
The Fed had said that it will raise rates four times this year. However, such claims have been reduced to one rate hike. The pace of a rate hike also seems to be slow as the U.S. two-year government bond yield remains below 1%. Meanwhile, the short-term Treasury bond yield is more policy-sensitive.
5 Top Dividend Aristocrats to Buy Now
The likelihood of a slower rate hike when compared to market expectations make dividend paying stocks more tempting. Meantime, the future is cast into uncertainty, thanks to the upcoming presidential elections. This also calls for investing in these stocks as they have tremendous financial strength and are immune to market vagaries.
But, why dividend aristocrats? This category of stocks outperforms other dividend payers on better quality business. Needless to say, these stocks reflect solid financial structure and healthy underlying fundamentals. They have also raked in excellent risk-adjusted returns over the last decade. In fact, this year, the S&P High Yield Dividend Aristocrats Index has rallied 9.5%, way above the S&P 500’s 3.3%.
Hence, we have selected five such dividend aristocrats to boost your returns. Such stocks also possess a Zacks Rank #2 (Buy). The favorable Zacks Rank should help these stocks gain further this year as well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medtronic plc (MDT - Free Report) manufactures and sells device-based medical therapies worldwide. The company has raised its dividend annually for the past 39 consecutive years. The company has a dividend yield of 2.1%, compared with the industry average of 0%. Its five-year average dividend yield is pegged at 2.09%.
Sysco Corporation (SYY - Free Report) markets and distributes a range of food and related products. The company has increased its dividend payments for 44 consecutive years. It has a dividend yield of 2.58%, compared with the industry average of 0%. Its five-year average dividend yield is 3.21%.
Pepsico, Inc. (PEP - Free Report) operates as a food and beverage company worldwide. The company has paid increasing dividends for 43 consecutive years. It has a dividend yield of 2.81%, compared with the industry average of 0%. Its five-year average dividend yield is 2.87%.
McDonald's Corp. (MCD - Free Report) operates and franchises McDonald's restaurants. The company's restaurants offer various food products, soft drinks, coffee, and other beverages. McDonald’s has raised its dividend each year for the past 40 years. The company has a dividend yield of 3.16%, compared with the industry average of 0%. Its five-year average dividend yield is 3.2%.
Chevron Corporation (CVX - Free Report) engages in integrated energy, chemicals, and petroleum operations worldwide. The company has raised its dividend payments for 28 consecutive years. It has a dividend yield of 4.09%, compared with the industry average of 3.07%. Its five-year average dividend yield is 3.71%.
Confidential from Zacks
This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today's Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public. Simply click here>>.