Credit: Shutterstock photoSince the end of the Great Recession, the markets have seen a painfully slow and weak recovery: debt crises in Greece, the U.S. and the Eurozone; secular bear markets in once-booming emerging markets; a freefall in commodities' prices from oil to copper to gold; and tough new regulatory regime for banks, hurting the crucial financial sector.
The U.S. equity bull market has taken all this in its stride and emerged stronger. This has continued for nearly 7 years.
However, after the famed all-time highs that most major U.S. indices hit this year, came the August carnage. Stocks renounced about 13% to 14% of their values as panic over the slowdown in the Chinese economy crippled investor sentiment the world over.
Yes, the stocks rebounded. Over the past few weeks, the bulls have somewhat conquered the bears even as investors grappled with mixed signals from the economy, namely strong housing and auto sales and decent consumer confidence on one hand, and weak job growth on the other. Overseas, we saw almost consistent weakness, led by China and Europe.
But the market is still moving sideways, waiting for a strong catalyst before deciding on a definite trend.
Fasten Your Seat Belts - Turbulence Ahead
After a lukewarm earnings season so far, last week's blowout jobs report (non-farm payroll report for October) gave fresh life to the drama surrounding the Federal Reserve's interest rate normalization in December.
Also, the relative tranquillity that has shrouded the market of late may well be brought to an abrupt end today. Half-dozen Fed speeches (including Fed Chair Janet Yellen) and some fresh jobs data scheduled to come out today might stir up the markets and provide further hawkish impetus to the interest rate policy. In fact, today's spotlight is on New York Fed President William Dudley - who might incorporate comments on policy into his speech as well as take questions on the same.
"Bumpy Ride" Delivered
Here is how we summarize the trifecta of volatility in the near term:
- The Fed is on the cusp of raising interest rates for the first time in nine years
- There are strong prospects of more policy easing out of China
- Europe and Japan have good reason to keep their printing presses running
Needless to say, the macro picture hardly makes for a strong 'buy' environment.
So the markets are likely to be plagued with volatility, global issues and confusion over the Fed's impending decision. However, the long-term fundamentals of the U.S. economy and equity markets stand firmly in place. In fact, it is widely expected that the U.S. will lead the world's growth story in the coming times.
So that makes it a great time to start investing in value stocks that also offer a good income buffer for our portfolio. Dividend stocks have been proven outperformers over the long term and provide a cushion against price volatility as well as economic uncertainty.
But how do we navigate the arguably overpriced market and find the hidden, undervalued gems that also have good yields?
Zacks to the Rescue
A time-tested way to earn stable returns in such times is to invest in value stocks that pay high dividend yields. We have handpicked 5 great stocks for your portfolio, all of which boast impressive dividend yields of over 5%, along with P/E ratios below 12.
To further refine our screen, we took the assistance of our new style score system , and zeroed in on stocks that have a Value Style Score of 'A' or 'B.' These stocks have bright prospects, and their attractive valuations serve as a perfect opportunity for investors to jump in and ride the anticipated growth.
Flaunting a solid Zacks Rank and Value Style Score, these high- dividend stocks are great bets to ride out the impending volatility.
5 High-Yield Value Picks
Huaneng Power International, Inc. HNP is an independent producer, generator and seller of power throughout China. The country is both the world's largest producer and importer of coal.
This stock offers a dividend yield of 5.3%. Over the past 60 days, the stock has witnessed solid estimate revisions, which led the Zacks Consensus Estimate to climb 10.2% to its present level of $7.01 a share for the current year.
What's more, this stock has a P/E of just 5.96, as against the industry P/E of 16.52. Boasting a top Zacks Rank #1 (Strong Buy), Huaneng Power also has a Value Score of 'A.'
CBL & Associates Properties Inc. CBL is a fully integrated real estate investment trust (REIT) which owns, develops, acquires, leases, manages, and operates regional shopping malls, open-air centers, community centers and office properties.
CBL offers an attractive dividend yield of 7.8%. Apart from this, the stock has been witnessing positive estimate revisions over the past month, which led the Zacks Consensus Estimate to climb by a penny to its current level of $2.29 per share for the current year.
This stock has a P/E of 5.91, compared with the industry P/E of 15.96. The stock sports a Zacks Rank #2 (Buy), in addition to a Value Score of 'A.'
Northern Tier Energy LP NTI is an Arizona-based independent downstream energy company with refining, retail and pipeline operations that serve the Petroleum Administration for Defense District (PADD) II region of the U.S.
The company offers a dividend yield as high as 16.71%. The stock has been witnessing positive estimate revisions over the past 60 days, which led the Zacks Consensus Estimate to move 24.1% higher to $4.64 a share for the current year.
Additionally, the company's P/E of 6.19 is way lower than the industry P/E of 18.41. The stock flaunts a Zacks Rank #1 with a Value Score of 'A.'
Hospitality Properties Trust HPT is an REIT engaged in buying, owning, and leasing hotels. Headquartered in Newton, MA, the REIT owns a diverse portfolio of hotels and travel centers located across 44 states, Puerto Rico and Canada.
With a dividend yield of 7.33%, the stock has been witnessing positive estimate revisions over the past 60 days, which led the Zacks Consensus Estimate to increase from $3.63 per share to $3.67 a share for the current year.
What makes this stock more attractive is its P/E of 7.36, which is lower than the industry P/E of 13.12. This Zacks Rank #2 stock has a Value Score of 'A.'
Zhejiang Expressway Co. Ltd.ZHEXY is an investment holding company engaged in the operation, maintenance, and management of high grade roads in China.
This stock provides an impressive dividend yield of 7.3%. Over the past two months, the stock has witnessed solid estimate revisions, which led the Zacks Consensus Estimate to climb 7.6% to its present level of 99 cents a share for the current year.
What's more, this stock has a P/E of just 11.25, as against the industry P/E of 18.11. Boasting a Zacks Rank #2, Zhejiang Expressway also has a Value Score of 'A.'
Hidden Gems for Your Portfolio
Whether you are looking to ride a bull run or manoeuvre a period of volatility, these are the right picks for you. These are capricious times, and the smartest play could be to buy stocks that yield good dividends, thus ensuring a steady income. With strong value and income characteristics of these stocks, blended with bullish analyst interest, we could just have uncovered hidden gems that could multiply your portfolio returns in the months to come.
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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
CBL&ASSOC PPTYS (CBL): Free Stock Analysis Report
HUANENG POWER (HNP): Free Stock Analysis Report
HOSPITALITY PRP (HPT): Free Stock Analysis Report
ZHEJIANG EXPRES (ZHEXY): Free Stock Analysis Report
NORTHERN TIER (NTI): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
