Experts warn that investors need to broaden their horizons as yields around the world decline.
“As interest rates head toward zero in the developed world, it’s going to get more difficult to find reasonably safe investments with attractive yields. That means income-seeking investors need to consider broadening their horizons and, in the process, do more research,”
MarketWatch’s Philip van Doorn wrote.
And MarketWatch explains that
FBR & Co. director of research
David Hilal said market sentiment “is now one of prolonged low rates and a flattening yield curve.” Hilal urged investors to avoid companies with potential credit problems.
FBR issued a list of 16 stocks (including five REITs) that Hilal said “offer an attractive yield and potential share appreciation.”
The analysts argue that the yields are safe and there are reasons to be optimistic that the share prices will rise, MarketWatch reported.
"The list not only includes companies whose dividends are considered “safe” by FBR’s analysts, but also stocks that the analysts believe are well-positioned because of particular industry disruptions," MarketWatch explained.
MarketWatch cited SunCoke Energy Partners
(SXCP) with a dividend yield of 15.65%, as an example, explaining that the company produces coke for use in steel production and also provides services at coal terminals.
FBR’s '16 stocks to own' for a prolonged low-rate environment:
- Company Ticker Industry Dividend yield
- Black Stone Minerals LP BSM Oil and Gas Production 6.91%
- Blackstone Mortgage Trust Inc. Class A BXMT Real Estate Investment Trusts 8.88%
- ClubCorp Holdings Inc. MYCC Movies/ Entertainment 3.57%
- Great Ajax Corp. AJX Real Estate Investment Trusts 7.22%
- Hersha Hospitality Trust Class A HT Real Estate Investment Trusts 6.02%
- James River Group Holdings Ltd. JRVR Property/ Casualty Insurance 2.35%
- Just Energy Group Inc. JE Electric Utilities 6.32%
- LCNB Corp. LCNB Regional Banks 3.72%
- Monroe Capital Corp. MRCC Investment Trusts/ Mutual Funds 8.90%
- National CineMedia Inc. NCMI Advertising/ Marketing Services 5.52%
- New Residential Investment Corp. NRZ Investment Managers 14.05%
- Preferred Apartment Communities Inc. APTS Real Estate Investment Trusts 5.42%
- SeaWorld Entertainment Inc. SEAS Movies/ Entertainment 5.71%
- Six Flags Entertainment Corp. SIX Movies/ Entertainment 3.93%
- Starwood Property Trust Inc. STWD Real Estate Investment Trusts 9.10%
- SunCoke Energy Partners LP SXCP Coal 15.65%
(Sources: FBR Research and FactSet)
However, while dividend yields appear to bolster the case for buying stocks now, but other metrics tell a different story, The Wall Street Journal has warned.
“Investors who expect bond yields to stay low and dividends to stay (relatively) high are buying stocks not because they are a bargain, but because they look better than bonds. The dividend bolsters the case that there is no alternative to shares,”
WSJ.com’s James Mackintosh explains.
Low bond yields are sending mixed messages to investors.”First, that the outlook for the world economy is grim, meaning they should expect lower returns on all assets in the future. Second, that government bonds are unappealing, so they should invest in riskier assets instead,” he explains.
"The low returns on the longest-dated bonds are extraordinary: 0.3% on Japan’s 40-year government bond, 0.9% on Germany’s 30-year bund, 2.1% on Britain’s 50-year gilt and 2.6% on the 30-year U.S. Treasury bond," WSJ.com reported.
“If these provide an accurate outlook for growth and inflation, we won’t be having much of either for the next couple of generations. Dividends look more and more attractive,” he said.
(Newsmax wire services contributed to this report).
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