Investors looking for strong performers under a variety of economic scenarios would be wise to consider value dividend stocks, Barron’s recently reported.
Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, recommended 10 value dividend stocks in a report titled “Global Income Best Ideas,” Barron’s explained.
The 10 are all income-oriented stocks with relatively low valuations.
- General Motors (ticker: GM)
- Halliburton (HAL)
- LyondellBasel Industries (LYB)
- Prudential Financial (PRU)
- Valero Energy (VLO)
- Applied Materials (AMAT)
- Dow (DOW)
- Duke Energy (DUK)
- Energy Transfer LP (ET)
- Targa Resources (TRGP).
Calvasina is relatively bearish on the market now. She sees risks of another pullback for stocks, based on lofty valuations and parallels to rallies in 2010, 2011, and 2016, Barron's reported.
“The valuation and positioning problems that set the stage for this year’s pullbacks have not been fully resolved,” she writes. Valuations are near historic highs and positioning by equities futures traders implies that we could see another selloff, Calvasina said.
The market is also vulnerable to bad news, she added, such as negative developments in the U.S.-China trade war. And since stocks may be at the tail end of a long bull market, profit-taking by traders could add to the selling pressure, Barron's quoted the strategist as saying.
To be sure, Reuters recently explained that defensive equity strategies focused on high payouts and steady earnings have gained in popularity this year as investors flock to safety, worried the biggest stock market rally in decades is about to come crashing down.
Investors have piled into defensive sectors, which generate higher dividends and have steady revenue streams, for the first time in two years, viewing them as the safest bet as global growth slows and trade tensions rise, data show.
Globally, utilities stocks have pulled in $4.5 billion this year while consumer goods stocks have drawn in $3.2 billion, according to EPFR data. This breaks a two-year exodus from those sectors and is the latest sign of how uneasy investors are with stocks at record-high levels in a worsening economic climate.
The inflows accelerated at the start of May, when hopes of a truce in a trade war between the U.S. and China were dashed.
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