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5 Top High-Yielding Mid-Caps Up This Year Amid Volatility

Nalak Das

Wall Street is once again riddled with volatility thanks to the outbreak of the deadly coronavirus in China that according to various economists may delay global economic recovery. Although the stock market overall remained northbound in January, severe intraday market fluctuations have dented investors’ confidence to some extent.

Despite market volatility, upon taking a closer look at Wall Street, one can find several mid-cap stocks with high dividend yield that have soared in January and still hold strong momentum. Investment in these stocks with a favorable Zacks Rank will be prudent at this juncture.

Concerns Over Coronavirus Outbreak

The Chinese authority has already confirmed as many as 213 deaths due to coronavirus and 9692 confirmed cases in the country. The deadly viral disease which was broke out in mid-January has already spread to 16 other countries including United States, and Germany and the Middle-East region.

Investors are concerned that if this virus spreads like the SARS pandemic that cost more than 800 lives worldwide, global economic growth will be affected. Economists estimated that SARS cost 0.8% of China’s GDP.

Anticipating a similar kind or even worse consequence of coronavirus, investors are reducing exposure on risky assets like equities in favor of safe-haven assets. On Jan 30, the yield curve of U.S. government bonds inverted partially for a brief period. The yield on 10-year U.S. Treasury Note fell to 1.546%, while the yield on 3-month Treasury Bill was at 1.554%.   

The bond market closed Jan 30, with benchmark 10-year, short-term 2-year and long-term 30-year US Treasury Note yields of 1.559%, 1.393% and 2.028%, respectively, the lowest since Oct 8, Oct 8 and Oct 4. Meanwhile, price of gold, another popular safe-haven asset, settled at $1,589.20 an ounce on Jan 30, the highest finish since Apr 1, 2013.

U.S. Economic Growth Slows

The Department of Commerce reported that U.S. GDP grew 2.1% in the fourth quarter of 2019. For the full year, the economy grew 2.3%, well below the previous year’s growth rate of 2.9% and Trump administration’s target rate of 3%. In fact, 2019 GDP growth rate was the lowest in three years.

Several economists are concerned that the U.S. GDP growth rate will dip further in the ensuing first quarter of 2020 owing to coronavirus. Several U.S. corporate giants in the fields of technology, airlines, aerospace, Travel and booking, luxury products, cruise services, and hotels and casinos have strong exposure in China either for input procurement or selling final products.

Why High-Yielding Mid-Cap Stocks?

Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine attractive attributes of both small and large-cap stocks. If economic impacts of coronavirus become severe, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure. Moreover, a high dividend payout ratio of these companies will provide a regular income stream.  

However, if the impact remains minimal, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to capital markets.

Our Top Picks

We have narrowed down our search to five high-yielding mid-caps that surged year to date and still have upside left. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks year to date.

TerraForm Power Inc. TERP owns and operates clean power generation assets. It operates through three segments: Solar, Wind and Regulated Solar and Wind. The company has an expected earnings growth rate of 37.5% for the current year. The Zacks Consensus Estimate for the current year has improved 11.5% over the last 30 days. The stock has a dividend yield of 4.56% and rallied 16.5% year to date.  

M.D.C. Holdings Inc. MDC is engaged in the construction, sale and related financing of residential housing and the acquisition and development of land for use in the United States. The company has an expected earnings growth rate of 18.5% for the current year. The Zacks Consensus Estimate for the current year has improved 0.7% over the last 30 days. The stock has a dividend yield of 2.62% and jumped 16.5% year to date.  

AllianceBernstein Holding L.P. AB provides diversified investment management services, primarily to pension funds, endowments, foreign financial institutions and to individual investors. The company has an expected earnings growth rate of 21.7% for the current year. The Zacks Consensus Estimate for the current year has improved 2.8% over the last 30 days. The stock has a dividend yield of 7.46% and climbed 10.8% year to date.  

Legg Mason Inc. LM provides asset management, investment banking and related financial services through its various subsidiaries. The company has an expected earnings growth rate of 1,065.8% for the current fiscal year (ending March 2020). The Zacks Consensus Estimate for the current year has improved 0.8% over the last 30 days. The stock has a dividend yield of 4.01% and gained 10.2% year to date.  

Community Healthcare Trust Inc. CHCT is a real estate investment trust that focuses on owning income-producing real estate properties associated primarily with the delivery of outpatient healthcare services in non-urban markets throughout the United States. The company has an expected earnings growth rate of 21.8% for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the last 30 days. The stock has a dividend yield of 3.52% and advanced 9.6% year to date.  

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TerraForm Power, Inc. (TERP) : Free Stock Analysis Report
 
M.D.C. Holdings, Inc. (MDC) : Free Stock Analysis Report
 
AllianceBernstein Holding L.P. (AB) : Free Stock Analysis Report
 
Legg Mason, Inc. (LM) : Free Stock Analysis Report
 
Community Healthcare Trust Incorporated (CHCT) : Free Stock Analysis Report
 
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