Consumer confidence – a key determinant of the economy’s health – improved strongly in June, after a dismal show in May. Strong recovery in the housing market and an improving labor market played a crucial role in boosting buyers’ confidence. Encouraging manufacturing index readings issued by the Institute of Supply Management (ISM) also hints at a pickup in GDP, indicating that economy is in good shape currently.
The recent hike of its benchmark interest rate by a quarter point by Federal Reserve reiterates the fact that the economy is looking up. Further, the Fed indicated that it anticipates the next hike in December, along with three more in the coming year, which signals rising consumer confidence as well as the economy’s growth.
The Consumer Staples sector, which is at the top 31% of the Zacks Sector Rank (5 out of 16), indicates optimism. We note that in the last six months, the sector has registered an increase of 8.04%, higher than the S&P 500 that is up 6.86%.
Surging consumer confidence and indications of a stronger economy in the second half of the year make the consumer staples sector attractive. Investing in consumer staples stocks is safer because of their defensive nature. However, risk-averse investors still remain skeptical. Therefore, targeting safer bets for now rather than going for stocks with only high earnings growth potential can prove to be a prudent move.
The Winning Strategy: Investment in Dividend Stocks
With the U.S. economy looking bright, investors should opt for dividend stocks. Not only do these stocks offer higher income in the current low-rate environment but also provide a cushion against equity market risks. Dividend stocks are historically less volatile and are a safe bet as dividends generally act as a hedge against economic uncertainty.
Dividend yield assesses the amount of income received in proportion to the share price. Amid the current volatility, it could be a smart strategy to buy stocks that yield good dividends, thus ensuring a steady income.
Thus, based on a solid Zacks Rank #1 (Strong Buy) or #2 (Buy), and dividend yields of more than 3%, we have zeroed in on four stocks that have the potential to ride out the impending volatility.
Philip Morris International, Inc. (PM - Free Report)
Philip Morris, the leading international tobacco company, has been increasing its dividend every year since it began paying dividends in 2008.
With a dividend yield of 3.55% and a beta value of 0.94, this Zacks Rank #2 stock is an attractive pick. You can see the complete list of today’s Zacks #1 Rank stocks here.
The stock has also rallied 30.8% in the last six months, higher than the Zacks categorized Tobacco industry’s gain of 17.9%.
The Coca-Cola Company (KO - Free Report)
The Coca-Cola Company, a Zacks Rank #2, is the world's largest beverage company and is the leading producer and marketer of soft drinks.
With a dividend yield of 3.34% and a beta value of 0.69, this stock is likely to be an attractive pick.
The stock has moved up 9.3% in the last six months, marginally higher than the broader sector’s gain of 8.0%.
Kellogg Company (K - Free Report)
Kellogg Company is the world's leading producer of cereals and convenience foods.
The company carries a Zacks Rank #2, and has a beta value of 0.50 and a dividend yield of 3.18%.
However, the company’s shares have declined 7.5% in the last six months, wider than the Zacks categorized Food-Miscellaneous/Diversified industry's 6.2% decline.
Tupperware Brands Corporation (TUP - Free Report)
Tupperware Brands is a global direct seller of premium, innovative products across multiple brands and categories through an independent sales force.
This Zacks Rank #2 company yields a dividend of 3.94%.
The stock has significantly rallied 27.2% in the last six months, in comparison with the Zacks categorized Consumer Products-Miscellaneous Staples industry’s gain of 8.5%.
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