Wall Street has been reeling under severe volatility for nearly two months. The broad-based market decline has dented investors’ confidence in risky assets like equities significantly. Lingering trade war between the United States and China, expectations of higher interest rates in near future and plummeting crude oil price technology stocks have made market participants skeptical regarding future growth potential of U.S. stocks.
However, investment in high-dividend paying stocks, over a reasonable time period, is likely to bring good returns, especially when the market is plagued with severe volatility. Consequently, it would be a prudent investment decision to bank on stocks promising strong dividend yield and a favorable Zacks Rank in a bid to capitalize on future growth.
Crude Oil Price Plunges
On Nov 24, the U.S. benchmark West Texas Intermediate (WTI) crude oil future price for January slid $4.21 or 7.7% to settle at $50.42 a barrel. This was the worst single day decline of WTI crude prices since Jul 6, 2015 and the lowest settlement since Oct 9, 2017. Notably, this marked the index’s seventh successive weekly decline. For the week ended Nov 26, the WTI crude price tumbled 10.6%.
On Nov 24, international benchmark of Brent crude oil also declined $3.80 or 6.1% to $58.80 a barrel. For the week ended Nov 26, the WTI crude price tumbled 10.6%. Currently, both the WTI and Brent are reeling in the bear territory. A surge in global oil supply and significantly weak global demand for oil are the primary reasons behind oil price plunge.
Conflicting News on US-China Trade War
President Donald Trump and his Chinese counterpart Xi Jinping are expected to meet at the G-20 summit later this month to resolve the eight-month old trade dispute between two of the world’s largest trading nations. Notably, the U.S. government has threatened of levying tariffs worth $267 billion on China in the first week of December if the upcoming summit between the two presidents fails to resolve the issue.
Moreover, on Nov 23, The Wall Street Journal reported that the Trump Administration has urged its allies to stop using Huawei telecommunications equipment due to serious concerns of security espionage by the Chinese company.
Technology Stocks Decline
The technology sector, which was by far the best performer in 2018, has plummeted in November. Large-cap tech behemoths, especially the powerful FAANG stocks have nosedived recently. All the five FAANG stocks are currently in the bear market, marking a drop of 20% or more from their 52-week peak.
Lingering trade conflicts with China is taking significant toll on technology sector. These companies are two-way dependent on China. A major portion of their inputs come from Chinese suppliers as well as from their offshore operations in China. Furthermore, China is one of the largest markets of these companies finished products.
Our Top Picks
Despite strong economic fundamentals, several concerns plague the investors. Trade conflicts, interest rate hike and a global economic slowdown are immediate concerns. At this juncture, it will be lucrative to invest in high-yielding stocks in order to ensure a steady income stream. We narrowed down our search to five such stocks with Zacks Rank #1 (Strong Buy) or 2 (Buy) and high-dividend yield.
The chart below depicts price performance of our five picks year to date.
CONSOL Coal Resources LP CCR engages in underground mines and related infrastructure that produce high- BTU bituminuous thermal coal. It has a dividend yield of 11.5% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. The company has expected earnings growth of 61% for current year. The Zacks Consensus Estimate for the current year has improved by 2.2% over the last 30 days.
Arbor Realty Trust Inc. ABR is a specialized real estate finance company which invests in a diversified portfolio of structured finance assets in the multifamily and commercial real estate markets. It has a dividend yield of 9% and a Zacks Rank #1. The company has expected earnings growth of 14.4% for current year. The Zacks Consensus Estimate for the current year has improved by 2.6% over the last 30 days.
Capital Southwest Corp. CSWC is a venture capital investment company whose objective is to achieve capital appreciation through long-term investments in businesses believed to have favorable growth potential. It has a dividend yield of 7% and a Zacks Rank #1. The company has expected earnings growth of 42.7% for current year. The Zacks Consensus Estimate for the current year has improved by 12.5% over the last 30 days.
Oxford Square Capital Corp. OXSQ is a business development company principally investing in syndicated bank loans and debt and equity tranches of CLO vehicles. It has a dividend yield of 12.1% and a Zacks Rank #2. The company has expected earnings growth of 15% for current year. The Zacks Consensus Estimate for the current year has improved by 1.5% over the last 30 days.
BG Staffing Inc. BGSF provides temporary staffing services in the United States. It has a dividend yield of 5.1% and a Zacks Rank #2. The company has expected earnings growth of 15% for current year. The Zacks Consensus Estimate for the current year has improved by 4.3% over the last 30 days.
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