With rates set to remain lower for longer, these seven big dividend stocks are due for strong performances
One of the biggest themes of financial markets in 2019 has
been plunging rates. The 10-Year Treasury yield (alongside pretty much every
other fixed income rate) has plunged in 2019, dropping from 2.7% on Christmas
Eve 2018, to just over 2% in late July 2019.
The catalyst? Slowing economic expansion across the globe,
which central banks want to curb. As such, central banks around the world project
to cut rates in an insurance move to prolong the current economic expansion.
Rates have plunged in anticipation of these cuts.
Will rates stay lower for longer? Probably. The Federal
Reserve will likely cut rates a few times in the back half of 2019 to prolong
the current economic expansion and breathe life back into the sluggish
industrial economy, which has been hurt by rising geopolitical tensions. As
such, the plunging rates theme of 2019 projects to turn into a consistent low
rates theme in the second half of 2019.
There are two big implications for equities in a low rate
world. First, equity valuations will move higher, since lower fixed income
yields justify lower earnings yields, and therefore, a higher equity multiple.
Second, investors will flock to stable dividend stocks, since many of those
stocks are now yielding more than fixed income instruments.
Consequently, investors should do two things here. One, stay
long the stock market. The environment remains favorable for stocks to go
higher. Two, consider playing defense by buying some dividend stocks. So long
as rates remain low, these stocks should have huge investor demand.
With that in mind, let’s take a look at seven big dividend
stocks investors should consider in today’s rate world.
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