After some uneventful weeks, political and geopolitical tensions escalated, triggering a broad sell-off in the global stock markets. The latest news from Italy, Spain, and White House wreaked havoc leading to the risk-off sentiments.
The prospect of new elections in Italy has raised fears of de facto referendum on the country’s membership in the euro while Spain might also head toward a snap election, given that prime minister Mariano Rajoy will face a vote of confidence on his leadership on Jun 1. All these developments could trigger a Eurozone meltdown.
Meanwhile, tensions between the United States and China have also flared up following Trump’s intentions of imposing a hefty 25% tariff on $50 billion worth of Chinese goods. The final list of goods subject to new import taxes is expected to be announced on Jun 15. Trump also plans to restrict Chinese investment in U.S. companies and limit the number of goods that these can sell to China. The news came within a week when both sides reached an agreement and vowed not to launch a trade war against each other.
Further, economic crisis in Venezuela, Jun 24 presidential and parliamentary election in Turkey and mid-term election in United States could not be overlooked too as these could result in further market worries.
As such, investors have become defensive and may want to relocate their portfolio to dividend stocks that provide stability and safety in a rocky market.
Why Dividend Stocks?
Dividend stocks offer safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices. This is especially true as companies that pay dividends generally act as a hedge against economic or political uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
The dividend-paying securities are the major sources of consistent income for investors when returns from the equity market are at risk. Meanwhile, bond yields have also declined sharply, boosting demand for dividend-paying stocks. Notably, 10-year Treasury yield posted their largest one-day drop since Jun 24, 2016 when Britain voted to exit the European Union.
While there are plenty of options in the dividend space, we have highlighted five stocks that yield more than 5% in dividends, have a Zacks Rank #1 (Strong Buy) or 2 (Buy), and a VGM Score of B or better. Any of these could be interesting plays for the coming months for investors in uncertain markets.
Two Harbors Investments Corp (TWO - Free Report) – Annual Yield: 12.16%
Based in New York, NY, Two Harbors Investment is a real estate investment trust that focuses on investing in, financing and managing residential mortgage-backed securities, non-agency securities, mortgage servicing rights, and other financial assets in the United States. With a market cap of $2.71 billion, Two Harbors has a Zacks Rank #2 and a VGM Score of B.
CVR Refining LP – Annual Yield: 9.23%
Based in Sugar Land, TX, CVR Refining is engaged in the refining of petroleum primarily in the United States. It has a market cap of $3.26 billion and has a Zacks Rank #1. It also flaunts a top VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
New Media Investment Group Inc. (NEWM - Free Report) – Annual Yield: 8.75%
Based in New York, NY, New Media Investment Group is an online advertising and digital marketing company. The company's core products include daily newspapers, weekly newspapers, locally focused websites,; mobile sites and yellow page directories. It has a market cap of $1.02 billion and carries a Zacks Rank #2. It also flaunts a top VGM Score of A.
TerraForm Power Inc. (TERP - Free Report) – Annual Yield: 6.93%
Based in Bethesda, MD, TerraForm Power is global renewable energy company. It operates clean power generation assets such as solar, wind, natural gas, geothermal and hydro-electricity. The stock has a Zacks Rank #1 and a VGM Score of B. It has a market cap of $1.62 billion.
Hi-Crush Partners LP (HCLP - Free Report) – Annual Yield: 6.84%
Based in Houston, TX, Hi-Crush Partners provides proppant and logistics solutions to the energy industry in North America. The company produces monocrystalline sand, a specialized mineral used as a proppant during the well completion process to facilitate the recovery of hydrocarbons from oil and natural gas wells. With a market cap of $1.16 billion, the stock has a Zacks Rank #2 and a VGM Score of A.
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