The dual prospects of four Fed rate hikes this year and higher inflationary expectations thanks to a commodity market rebound (mainly crude oil) have sent shockwaves across the treasury market. The 10-year benchmark U.S. Treasury yield spiked to 3% on Apr 24 for the first time since January 2014.
The Fed enacted a 25-bp hike in March, and two more are likely in June and September. But the fed funds futures market lately signaled a 50% chance of one more move in December. Plus, the likelihood of new government debt issuances has played its role in pushing the yields higher.
In such a scenario, many will be cautious about their fixed income holdings with this prospect. But beyond that, stocks are also likely to face challenges on a gradual cease of cheap money inflows. After all, global stocks have attained heights amid ultra-easy monetary policy.
Time to Buy High Dividend Stocks?
Investors, who want to start preparing for an uptick in interest rates, may tap high dividend-paying stocks. After all, a high dividend provides investors avenues to make up for capital losses, if that happens at all.
Also, dividend investing calls for value investing. If a broad-based selloff hits the market in a rising yield environment, value stocks may come to investors’ protection. The looming trade tension (which has eased a lot in recent times though) is another reason for which investors may be in search of dividend-paying stocks that offer benchmark-beating yields.
Below we highlight five stocks that yield more than 3% annually.
Tecnoglass Inc. (TGLS - Free Report) – Yields 7.05%
The company is in manufacturing and selling architectural glass and windows and aluminum products for the residential and commercial construction industries. It has a Zacks Rank #2 (Buy) and a VGM (Value, Growth, Momentum) Score of B. The stock hails from a top-ranked Zacks industry (top 43%).
Main Street Capital Corporation (MAIN - Free Report) – Yields 6.13%
The Zacks Rank #2 stock is a specialty investment company providing customized financing solutions to lower middle market companies that operate in diverse industry sectors. The stock comes from a top-ranked Zacks industry (top 38%) and has a VGM Score of B.
Macy's Inc. (M - Free Report) – Yields 4.96%
The company is one of the nation's premier retailers. The stock belongs to a top-ranked Zacks industry (top 1%). It sports a Zacks Rank #1 (Strong Buy) and has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Seagate Technology Plc (STX - Free Report) – Yields 4.33%
The company offers a portfolio of hard disc drives, solid state drives and solid-state hybrid drives. The stock belongs to a top-ranked Zacks industry (top 9%) and has a Zacks Rank #1. Moreover, it has a Value Score of A.
The AES Corporation (AES - Free Report) – Yields 4.38%
The Zacks Rank #2 company is a diversified power generation and utility company. It hails from a top-ranked Zacks industry (top 32%) and has a VGM Score of A.
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