While the uncertainty related to the Fed rate hike continues, macroeconomic headwinds continue to loom large in China and the global markets hardly show any signs of a return to health.
Will It/Won’t It?
The Oct 28 release of the U.S. Federal Reserve reaffirmed the current 0–0.25% interest rate and termed it as “appropriate.” While there is still uncertainty over the timing of a rate hike, the release mentioned that the Federal Open Market Committee “will assess progress — both realized and expected — toward its objectives of maximum employment and 2 percent inflation” in determining whether it will be proper to raise the target range at its next meeting.
Moreover, the U.S. gross domestic product (GDP) increased at a 1.5% annual rate in the third quarter compared with 3.9% in the previous quarter, as per recently released U.S. GDP data. The deceleration in the third quarter primarily reflects a downturn in private inventory investment and deceleration in exports, nonresidential fixed investment, personal consumption expenditures, state and local government spending, and residential fixed investment that were partly offset by a deceleration in imports, thereby cutting short the hopes of a rate hike in December this year.
Moreover, concerns related to China are likely to linger with the country's banking industry bearing the brunt of the country's economic slowdown with its big four state-owned banks reporting profit growth below 1% in the first three quarters.
In addition, combining the actual results from the 253 S&P 500 members with estimates for the still-to-come 247 index members, total earnings for the index are expected to decline 2.7% from the same period last year on a 3.9% decline in revenues in the third quarter of 2015. This would follow the 2.1% decline in earnings on 5.7% lower revenues in the preceding quarter.
Moreover, estimates for the current period are declining at an accelerated pace, with total fourth-quarter 2015 earnings for the S&P 500 index now expected to be down 6.6% from the same period last year, which is down from an expected decline of 4.7% two weeks back. For a detailed look at the earnings outlook, please check our Zacks Earnings Trends Report.
So, the going will be tough for the last two months of the year. In these circumstances, investors should work out a tactic for dodging volatility. For investors looking for a steady stream of funds and craving for yields, the appeal of a dividend remains strong.
With the financial health of the companies deteriorating due to global economic slowdown and analysts downgrading earnings forecasts, the pace of dividend growth has slowed down than ever and companies are less enthusiastic about paying dividends. In this continued low-rate environment, investors may turn to stocks that have consistently raised dividends. These stocks are a comparatively safer bet in the current low-rate environment as they act like a cushion during economic uncertainties.
5 Rock-Solid Stocks with Great Dividend Yields
We have picked five stocks that could fetch promising returns. Not only do these stocks have a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy) but also have a dividend yield of 5% or more.
USD Partners LP USDP: This Texas-based company acquires, develops and operates energy-related rail terminals and other high-quality and complementary midstream infrastructure assets and businesses. Additionally, the company provides railcar services through the management of a railcar fleet that is committed to customers on a long-term basis.
• Zacks Rank #1
• Dividend Yield: 13.14%
Monroe Capital Corporation MRCC: Headquartered in Illinois, Monroe Capital Corporation is a non-diversified, closed-end management investment company focused on providing senior and junior debt and equity co-investments to middle-market companies in the U.S. and Canada. Investment types include unitranche financings, cash flow and enterprise value based loans, acquisition facilities, mezzanine debt, second lien or last-out loans and equity co-investments.
• Zacks Rank #1
• Dividend Yield: 9.46%
Paragon Offshore plc PGN: Based in Texas, the company is a provider of offshore drilling rigs across the world. Paragon's drilling fleet includes 34 jackups and its main business is contracting its rigs, related equipment and work crews for oil and gas drilling and workover operations for its exploration and production customers on a day rate basis around the world.
• Zacks Rank #1
• Dividend Yield: 52.08%
American Midstream Partners, LP AMID: The company owns, operates, develops and acquires a diversified portfolio of midstream energy assets. This Colorado-based growth oriented company offers midstream services across Texas, North Dakota, and the Gulf Coast and Southeast regions of the U.S.
• Zacks Rank #2
• Dividend Yield: 16.64%
Harte-Hanks Inc. HHS: Texas-based Harte-Hanks offers a broad range of marketing services, in media from direct mail to email, including agency and digital services; database marketing solutions and business-to-business lead generation; direct mail; and contact centers.
• Zacks Rank #2
• Dividend Yield: 8%
Bottom Line
Volatility in the markets is expected to continue with 105 S&P 500 companies are scheduled to report results for the third quarter. Moreover, we have a hectic week ahead, on the economic front, with the U.S. ISM manufacturing data, factory orders, the October jobs and auto sales reports to remain in focus. In addition, several European countries will report PMI manufacturing and services data. In this environment, it will be prudent to take note of the top-ranked, dividend paying stocks discussed above.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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