Stock markets had a choppy ride last month owing to rising volatility. Factors including the uncertainty surrounding the upcoming U.S. Presidential election and concerns over oil output cut led major benchmarks to end in the red in October. The popular fear-gauge, CBOE Volatility Index (VIX) surged nearly 23.3% during the month, indicating rising volatility levels in the financial markets.
Also, the index jumped 33.8% over the past five trading sessions to reach its highest level since June yesterday. In a scenario like this one, investors always look for stocks that can safeguard their portfolios from market turbulence. Fundamentally strong yet boring stocks may be the most desirable ones right now.
Factors Behind Rising Volatility
Rising speculations about a close fight in the upcoming U.S. Presidential election emerged as the major factor behind the surge in volatility level. While a Reuters/Ipsos opinion poll released on Monday showed that Democrat representative Hillary Clinton still holds a significant lead over Donald Trump, separate polls from ABC News and the Los Angeles Times indicate that Trump is now ahead of Clinton by one point. After significantly outpacing Trump in all three Presidential debates, market participants were confident of Clinton’s win in the election.
However, the sentiment took a reverse turn following FBI’s probe into Clinton’s emails. Clinton is being investigated on her use of a private server and handling of classified information while she was the state secretary. FBI Director James Comey said that in connection with the investigation “of former Secretary Clinton's personal email server,” the FBI discovered existence of new emails relating to the investigation. (Also Read: 5 Rock-Solid Stocks to Buy in November).
Separately, fluctuations in oil prices also played a significant role in escalating volatility level. The CBOE Crude Oil Volatility Index (OVX), which is a popular gauge of measuring volatility in crude oil, jumped 7.1% over the past five trading sessions. Despite Saudi Arabia’s announcement to control output, doubts over possible crude production cuts by major oil producing nations still persist.
This in turn dragged oil prices into negative territory in recent days. During a meeting in Vienna last week, non-OPEC countries like Russia, Brazil, Mexico and others did not commit to freeze or cut their crude output until OPEC members agree to do the same.
Why Boring Stocks?
Stocks that are always in the news and are believed to be exciting also tend to fall prey to market volatility. On the other hand, stocks that are not so exciting or businesses that do not provide enough excitement to attract investors are commonly called boring. These boring stocks are generally poised to remain out of favor due to relatively less appeal and thus are available at discounted prices. More importantly they are speculated to be less affected by market volatility.
Different studies have also showed that these stocks are poised to provide higher returns compared to those that grab more investor attention. Boring stocks that are also good dividend payers are one of the best investment choices available in the current volatile environment. This is why we have tried to provide some potential options from this space that can lend support to your portfolio in this backdrop.
5 Boring Stocks to Buy
Though we do not have any predefined screen for finding Boring stocks, we have tried to run a screen on our Research Wizard tool on the basis of fundamentals that may help to find out impressive dividend paying Boring stocks. Here are the basic criteria that we have considered:
- Dividend yield greater than 2.5%
- Forward P/E ratio below the median of S&P 500
- Price to cash flow ratio below the industry average
- Beta less than 1
- A history and forecast of rising EPS
- A history of rising dividends
- Zacks Rank #2 (Buy) or better
Here are five stocks from the list that showed up following the screen:
DSW Inc. DSW: This branded footwear and accessories retailer has a forward price-to-earnings (P/E) ratio for the current financial year (F1) of 14.88, lower than the S&P 500 and industry average of 24.31 (as of Oct 28) and 16.18, respectively. Currently, the company has a beta of 0.72. It has a current dividend yield of 3.85% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Spire Inc. SR: This natural gas utility company has a P/E ratio of 17.64, lower than the industry average of 20.66. This Zacks Rank #2 (Buy) company has a beta of 0.34. It has a current dividend yield of 3.12%.
Holly Energy Partners L.P. HEP: This refined product pipelines and terminals operator has a P/E ratio of 16.01, lower than the industry average of 21.70. This Zacks Rank #2 company has a beta of 0.86. It has a current dividend yield of 7.79%.
VEREIT, Inc. VER: This publicly owned real estate investment trust has a P/E ratio of 12.26, lower than the industry average of 14.08. This Zacks Rank #2 company has a beta of 0.72. It has a current dividend yield of 5.85%.
Heritage Financial Corporation HFWA: This holding company for Heritage Bank has a P/E ratio of 12.55, lower than the industry average of 16.27. This Zacks Rank #2 company has a beta of 0.31. It has a current dividend yield of 2.61%.
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