From the end of March through the end of August, stocks had
a tremendous runup to record high levels. The gains completely wiped out the
losses from the mid-winter ‘coronavirus collapse,’ and it looked like we were
in for a sustained run of good days. But all of that changed as September rang
in. The market hit a bump, and has been undergoing a correction. The Nasdaq is
down nearly 7%, and volatility has been high so far this month.
A new report from Canaccord's Tony Dwyer puts the situation
into perspective by pointing out the major source of uncertainty: “In a true
statement of the obvious,” he writes, “this is the most complicated
election-year setup we could possibly have.” He goes on to note the four most
important ‘unknown’ factors: how the voting will actually happen this year, and
avoiding vote fraud; who will win the White House; if the Democrats will sweep
the Federal level elections; and, if the loser will concede the contest without
a dragged-out legal battle. These are points giving investors ulcers at night.
Dwyer balances all of that with the predictable factor:
“Unlike the political backdrop, which is totally unpredictable, we know the Fed
intends to keep rates at zero and to keep intervening when there are any signs
of stress.” An active central bank will continue injecting liquidity into the
system, which will be bullish for stocks. In Dwyer’s view, the only question
is, what tools will the Fed use?
So, in a situation that recalls Donald Rumsfeld’s ‘unknown
unknowns,’ many investors are gravitating toward defensive stocks, taking steps
to ensure a steady income stream. And this brings them, quite naturally, to
dividend stocks. These traditional defensive plays may not offer the high share
appreciation that is so attractive in normal times, but their high-yielding
dividends make up for that when things turn sideways.
With this in mind, analysts from JMP Securities have tapped
three such defensive stocks, with dividend yields range from 8.5% to more than
12%. We’ve run the three through the TipRanks database to find out what makes
them so compelling. Here are the results.
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