The U.S.-China trade tussle is far from over. President Trump recently threatened to raise tariffs on Chinese goods, leading to a global market selloff. The trade talks between U.S. and China are almost on the verge of collapse, and, that does not bode well for corporates as well as the economy.
Thus, in order to safeguard your portfolio, investing in dividend aristocrats seems prudent. After all, these stocks provide higher total returns with lower volatility.
Full-Blown Trade War
After weeks of signals that the U.S. and China are close to a trade deal, things rather took an ugly turn. Trump recently escalated the trade war by announcing tariffs imposed on $200 billion worth of Chinese goods to be increased from 10% to 25%.
He went a step further and threatened to levy tariffs on all Chinese goods with America, something that could easily destabilize the relations between two of the major economies in the world.
Trump’s move will invariably affect more than 5,000 Chinese made products including fresh and frozen foods, chemicals, textiles, metalwork, building materials, electronics and consumer goods. After all, Trump is aiming to impose tariffs on the remaining $325 billion Chinese goods. He warned that “325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
Protection of intellectual property rights continues to be a bone of contention for the two economies. Chinese delegates said that they will deal with such issues but Trump wants “strong enforcement language’’ to police any deal.
Trump is desperate to narrow the difference between imports and exports in order to boost its manufacturing sector. He is luring U.S. corporate houses to import less and export more. Thus, he has imposed tariffs on Chinese goods. But the issues are beyond trade war. It’s also about American might. Otherwise why would there be a U.S. government crackdown on Huawei Technologies Co., a Chinese telecommunications giant.
Impact on the Stock Market
The trade war will invariably hurt business confidence and the global economy as a whole. On the one hand, Apple, Starbucks and FedEx to name a few have repeatedly cautioned that their performance will take a hit due to a slowing Chinese economy. On the other hand, more than 400 Chinese companies said that their earnings will take a beating on trade-related issues.
The IMF, by the way, has trimmed global economic growth for this year for the third time in six months predominantly due to trade tensions. Last month, IMF said that global growth would be 3.3% this year, the weakest since 2009. The United States will not be spared either. In fact, Bank of America warned that a trade war “would be much more painful” for the United States, triggering market gyration and denting investors’ sentiment.
Stock Market Meltdown in May
Stocks are, in fact, bleeding in the month. After all, the popular axiom “sell in May and go away” has always encouraged investors to sell stock holdings in the month to avoid getting affected by the seasonal decline in equity markets.
The strategy also involves getting back into the equity markets in November, thereby evading the typical volatile May-October period. Historically, stocks have underperformed in the six-month period commencing May and ending in October, compared to the six-month period from November to April.
Mostly lower trading volumes in the summer season and substantial increase in investment during the winter months are cited to be the main reasons behind this discrepancy in returns.
4 Dividend Aristocrats to Buy Now
With things not looking up for the stock market this May, it’s prudent to invest in dividend aristocrats for their risk-adjusted returns. These stocks reflect solid financial structure and healthy underlying fundamentals, and are unperturbed by market volatility. This category of stocks also outperforms other dividend payers on better quality business.
Hence, we have selected four dividend aristocrats to boost your returns. These stocks also possess a Zacks Rank #2 (Buy). The favorable Zacks Rank should help the stocks gain further this year and beyond as well.
(KMB - Free Report
) manufactures and markets personal care, consumer tissue, and professional products. Kimberly-Clark has raised its dividend for 47 consecutive years. The Zacks Consensus Estimate for its current-year earnings has increased 1.1% over the past 60 days.
McCormick & Company, Incorporated
(MKC - Free Report
) manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. McCormick has paid dividends each year since 1925. The Zacks Consensus Estimate for its current-year earnings has increased 0.4% over the past 60 days.
(CTAS - Free Report
) provides corporate identity uniforms and related business services. Cintas is a high-growth dividend stock. It has raised its dividend 35 years in a row. The Zacks Consensus Estimate for its current-year earnings has increased 1.5% over the past 60 days.
Kimberly-Clark, McCormick & Company, PepsiCo and Cintas have a dividend growth rate of 22.6%, 54.1%, 63.4% and 166.2%, respectively, over the past 5 years. Have a look –
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