7 Big Dividend Stocks to Consider In a Low-Rate World

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.

The 9 Best Stocks to Buy for the Next Decade

You can put these stocks in a drawer and not look at them again for the next 10 years

A few years ago, InvestorPlace contributor Dan Burrows highlighted the ten best-performing S&P 500 stocks of the past decade. The most important lesson one finds by studying these high-flying stocks is that patience wins out over all other attributes of a successful investor.

A classic example of how true this is involves the Fidelity Magellan Fund (MUTF:FMAGX), the large mutual fund made famous by portfolio manager Peter Lynch. Lynch ran the fund for 13 years from 1977 until 1990, growing it from $20 million to $14 billion before stepping aside.

Fidelity studied the returns of Fidelity Magellan unit holders over those 13 years to see how they compared to the legendary portfolio manager. While Lynch managed to achieve a 29% annual return over this period, the average investor lost money.

Patience would have served those investors well, as the ups and downs of the stock market shook them out of their positions — and in doing so, deprived them of millions of dollars in profits. A $10,000 investment in 1977 held until 1990 was worth $273,947 by the end of that 13-year period.

I’m not Peter Lynch, but I can say with some confidence that the following names are the nine best stocks to buy for the next decade.

13 Best Stocks to Buy for the Next Stock Market Correction

The stock market has been shaken in recent days by an escalation of the trade battle with China, as well as a Federal Reserve move to lower benchmark interest rates for the first time since 2008 – but not by as much as some on Wall Street hoped. But even after heavy selling, Standard & Poor’s 500-stock index remains just a few percent off all-time highs.

Is this the start of a long-awaited stock market correction? Possibly. But rather than trying to gauge exactly when a correction is coming or what will spark it, a better plan is to simply prepare. That is, you can shift the composition of your portfolio so it can better weather a storm – but still profit as long as the bull keeps running.

A more defensive posture does have drawbacks; nothing is free. The biggest problem is being underweight the stocks that are still driving the market higher. But for investors who do think a correction is coming and don’t want to play the losing game of trying to time the market, we’ve asked a group of investment managers and other experts which stocks they expect to hold up should the market pull back.

Here are 13 of the best stocks to buy to ride out a stock market correction. Most of these revolve around the idea of investing in high-quality companies that have good cash flows and business health, boasting pricing power and stable customer demand. This includes consumer staples stocks that sell products and services that people cannot live without. A couple will help raise your exposure to gold, which is emerging from a multiyear slumber.

Goldman Sachs: 5 High-Growth Stocks To Buy Now

Goldman Sachs has just revealed a valuable investing strategy that’s worth keeping a close eye on in the coming months. The firm is now recommending stocks with the fastest expected return-on-equity growth (or ROE).

That’s because market upside is increasingly limited from current lofty levels, says Goldman Sachs. Indeed, the S&P 500 has already put on a 17% sprint year-to-date- which means it is now trading very close to its fair value relative to interest rates, profitability and price-to-book valuations. As a result, investors must be particularly savvy when scouting for stocks with the potential to generate outsized returns.

“We forecast flat S&P 500 margins through 2020, with risks tilted to the downside. ... Amid concerns about the growth and profitability outlook this year, investors have assigned a premium to companies able to expand ROE,” the firm’s chief US equity strategist David Kostin said.

He directed investors to the firm’s basket of 50 S&P 500 stocks with the highest consensus estimates of ROE growth. This basket is already proving its worth and is currently beating the index by 5 percentage points year-to-date. In essence, ROE reflects the return a company generates on capital that is owned by the shareholders.

“The basket typically outperforms in weakening growth environments as investors assign a scarcity premium to firms that are able to expand ROE despite index-level headwinds,” Kostin told investors. So with this outlook in mind, here are five stocks that feature on the firm’s ROE basket list:

Main Street Capital Corporation: Finally, A Safe High-Yield Stock

Main Street Capital Corporation Now Pays 7%

I usually avoid high-yield stocks, and for good reason.

Each day, I screen the market for new investment ideas. And with a few mouse clicks, you can pull up dozens of high-yield securities. Right now, for instance, 120 stocks now pay out more than 10%.

Those yields might sound great, until you look at the companies behind them; they’re mostly junk. The companies behind these high-yield stocks often fail to generate enough cash to cover their distributions. In most cases, it’s only a matter of time before the payout gets slashed.

That said, sometimes you do find exceptions. Over the years, I’ve found pockets of safe high-yield stocks buried in the trash. You just need to shift through a lot of rubbage. And recently, I found one of these “pockets” in the lending business: Main Street Capital Corporation (NYSE:MAIN).

Main Street’s business model is pretty straightforward to wrap your head around: the company lends money to other businesses and collects interest payments. The profit comes from the spread between the yield earned on these loans and its cost of capital.