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FBR: 16 Dividend Stocks to Buy as Rates Near Zero

FBR: 16 Dividend Stocks to Buy as Rates Near Zero
(Dollar Photo Club)

By    |   Thursday, 21 July 2016 07:41 AM

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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Experts warn that investors need to broaden their horizons as yields around the world decline.
dividend, stocks, interest rates, zero
Thursday, 21 July 2016 07:41 AM
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