Investors are dumping growth stocks and hunting for dividends with the nearly 10-year-old bull market starting to fall apart.
The Dow Jones Industrial Average plunged more than 600 points on Monday fueled by a combination of rising trade war fears and concerns over global economic growth. A warning from a key Apple supplier Lumentum Holdings – and what that means to the tech king – did nothing to boost market sentiment, either. Chip stocks such as Nvidia and Advanced Micro devices subsequently cratered on the news.
Bank of America Merrill Lynch said Tuesday that exposure to tech stocks among fund managers have reached its lowest level since February 2009 this month.
Amid Monday’s carnage, investors once again gravitated to perceived safe-haven companies that sport decent dividend yields to compensate for their so-so earnings growth potential. There were 69 new 52-week highs in the market on Monday compared to 286 fresh 52-week lows.
Several prominent names stood out in particular for reaching a new 52-week high:
- Verizon (parent company of Yahoo Finance)
- Proctor & Gamble
The average dividend yield for the eight companies mentioned above is roughly 2.2%. Nothing to write home about when compared to the 10-year Treasury which is yielding 3.1%. But with most technology growth stocks not paying any dividends and worries about the sector’s earnings slowing sharply in 2019, a 2.2% dividend yield looks mighty attractive.
An added sign of the bearishness starting to permeate Wall Street: the 52-week high list contains scores of multinational companies that may see sales and earnings hit by the latest move in the U.S. dollar. The U.S. dollar has gained about 6% this month.
Clearly, it’s dividend or bust right now.
Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi