Despite the U.S.-China trade concerns, impeachment jitters, uncertainty about Fed’s future course of action and slowdown in corporate earnings, the stock market has fared well so far this year.
However, things have been taking a turn for the worse of late, making it difficult for equities to stay afloat. While a private-sector report has shown that the pace of job creation has slowed down, U.S. factory activity fell for the second straight month.
In such a scenario, investing in dividend aristocrats will help safeguard your portfolio prudent. After all, these stocks provide higher total returns with lower volatility.
Wall Street Takes a Hit, Fear Index Pops
The Dow dropped 1.9% on Oct 2, following a decline of 1.3% in the previous trading session. The blue-chip index saw the worst start to a quarter since the financial crisis in the fourth quarter of 2008. The broader S&P 500, by the way, dropped more than 1% in successive sessions for the first time this year. And for the S&P 500, it’s the nastiest quarterly beginning since the fourth quarter of 2009. In fact, all the S&P 500 sectors declined in yesterday’s trading session, with industrial and technology companies being the worst hit.
The tech-heavy Nasdaq is down 2.7% so far in October. What’s more, all the three major indexes are now in the negative territory for the past 12 months. Meanwhile, the Cboe Volatility Index is on pace for its biggest quarterly rise on record. The so-called fear gauge has climbed 29% in the first two trading sessions of this month, eclipsing the 24.6% gain in the fourth quarter of 1992.
Investors have thus flocked to safe assets such as bonds and gold. But why in the first place are they deserting stocks? This is because a slowdown in private sector hiring and contraction witnessed by American manufacturers raise concerns about the current state of the economy.
What’s Driving This Market Mayhem?
Per the ADP report, the nation’s private-sector companies added a modest 135,000 jobs in September, a tell-tale sign that hiring is decelerating along with the broader economy. We should know that analysts had expected job addition of 152,000.
ADP trimmed the number of new jobs created in August from an earlier 195,000 to 157,000. Needless to say, ADP is the largest processor of paychecks for a number of companies and thus millions of employees.
Such a decline in private sector hiring amplified concerns that the trade war with China is certainly taking a toll on the domestic economy, let alone global conditions. Tom Plumb, chief investment officer at Plumb Funds, cautioned that “people have been anticipating a bear market for years and they are very anxious and so any number like the ADP number is amplified in the volatility on the downside.”
To add to the bearishness, American manufacturers saw their largest contraction last month since the 2007-2009 great recession. The ISM’s manufacturing index was 47.8% for September, dropping from 49.1% in August and marking the lowest level since June 2009.
It’s worth pointing out that any reading above 50% indicates that the economy is in good shape, but anything below 50% shows that things are getting pretty messy. Again, the biggest culprit in this case is the ongoing trade issue.
Time to Buy Dividend Aristocrats: 5 Solid Choices
With things looking dicey for the stock market this month, 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. These companies also outperform other dividend payers on better quality business.
Hence, we have selected five dividend aristocrats to boost your returns. These stocks also possess a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cintas Corporation (CTAS - Free Report) provides corporate identity uniforms and related business services. The company is a high-growth dividend stock. It has raised its dividend 35 years in a row. Currently, it has a dividend yield of 0.8%. The Zacks Consensus Estimate for its current-year earnings has moved up 1.8% over the past 60 days.
Air Products and Chemicals, Inc. (APD - Free Report) provides atmospheric gases, process and specialty gases, equipment, and services. The company has boosted dividend payments for 36 consecutive years. It has a dividend yield of 2.1%. The Zacks Consensus Estimate for its current-year earnings has risen 0.52% in the past 90 days.
Walmart Inc. (WMT - Free Report) engages in retail and wholesale operations. The company’s first dividend was 5 cents a share, paid in 1974. It has consistently raised its dividend every year. Currently, it has a dividend yield of 1.8%. The Zacks Consensus Estimate for its current-year earnings has moved 1.4% north in the past 60 days.
Target Corporation (TGT - Free Report) operates as a general merchandise retailer in the United States. The company has increased its dividend for 48 consecutive years. Currently, it has a dividend yield of 2.5%. The Zacks Consensus Estimate for its current-year earnings has risen 3.9% over the past 60 days.
AbbVie Inc. (ABBV - Free Report) discovers, develops, manufactures, and sells pharmaceutical products. The company has boosted dividend payments for more than 25 consecutive years. Now, it has a dividend yield of 5.8%. The Zacks Consensus Estimate for its current-year earnings has climbed 0.5% in the past 60 days.
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