After a tumultuous 2018, U.S. stock markets have received some respite in 2019 so far. Although Wall Street displayed signs of recovery, several headwinds still persist. Lingering trade related conflict between the United States and China, fears of a global economic slowdown, geopolitical uncertainties like the Brexit issue and uncertainty regarding Fed’s monetary stance in 2019 are near-term concerns.
Investment in high-dividend paying stocks, over a reasonable time period, is likely to bring good returns, especially under market turmoil. Consequently, it would be a prudent investment decision to bank on stocks with promising dividend yield and a favorable Zacks Rank.
Concerns over Global Economic Slowdown
On Jan 21, the International Monetary Fund (“IMF”) reduced global economic growth forecast for 2019 and 2020. The fund reduced its global growth projection for 2019 to 3.5% from 3.7% in October. Likewise, global growth projection for 2020 was reduced to 3.6% from 3.7% in October, marking the second curtailing in last three months.
Per IMF, growth rate in advanced economies is on the decline while it has slowed down in emerging economies. Advanced economies are likely to grow by 2% and 1.7% in 2019 and 2020, respectively. Meanwhile, emerging economies are expected to grow by 4.6% and 4.9% in 2019 and 2020, respectively.
For the IMF, the 10-month old trade conflict between the United States and China is a major concern. The Chinese economy grew 6.6% in 2018, its slowest pace since 1990. Contagion effect of Chinese slowdown is likely to affect other emerging countries. Moreover, prolonged problem related to Brexit in the U.K. is another concern.
Conflicting News on Trade War Front
According to CNBC, the U.S. government has rejected a trade meeting with China scheduled to be held this week on the ground of gross disagreements over intellectual property rights. The primary concern of the Trump administration stems from the apprehension that China is stealing intellectual property from U.S. companies by unfair means.
This is the focal point of trade conflict between the two largest trading countries of the world. Notably, the two countries are currently going through a 90-day truce period. Notably, both countries will refrain from tariff imposition during this period. The deadline will come to an end on Mar 1.
On Jan 18, Bloomberg reported that China has offered to ramp up imports from the United State in the next six years. Total value of these imports will be $1 trillion which will bring down the United States’ massive trade deficit with China to zero in 2024.
On Jan 16, The Wall Street Journal reported that the U.S. government is contemplating a proposal regarding lifting of some tariffs imposed on China. This will act as an incentive to the Asian economic giant to make deeper concessions to the United States. However, a Treasury Department spokesperson later denied the news.
Our Top Picks
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 each carries either a Zacks Rank #1 (Strong Buy) or #2 (Buy) and high-dividend yield. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows price performance of our five picks in the last six months.
Ready Capital Corp. RC acquires, originates, manages, services, and finances small balance commercial loans, small business administration loans, residential mortgage loans and mortgage backed securities. It has a dividend yield of 10.8% and a Zacks Rank #1. The company has expected earnings growth of 29.6% for current year. The Zacks Consensus Estimate for the current year has improved by 1.7% over the last 60 days.
CrossAmerica Partners LP CAPL engages in the wholesale distribution of motor fuels, and ownership and leasing of real estate used in the retail distribution of motor fuels in the United States. It has a dividend yield of 12.7% and a Zacks Rank #2. The company has expected earnings growth of 125% for current year. The Zacks Consensus Estimate for the current year has improved by 100% over the last 60 days.
Plymouth Industrial REIT Inc. PLYM is a full service, vertically integrated real estate investment company across the United States. It has a dividend yield of 9.6% and a Zacks Rank #1. The company has expected earnings growth of 218.4% for current year. The Zacks Consensus Estimate for the current year has improved by 2.5% over the last 60 days.
CONSOL Coal Resources LP CCR produces and sells high-Btu thermal coal in the Northern Appalachian Basin and the eastern United States. It has a dividend yield of 11.7% and a Zacks Rank #1. The company has expected earnings growth of 54.1% for current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 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 9.7% and a Zacks Rank #2. 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 60 days.
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