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Defensive REITs for Income Investors to Mitigate the Downside Risk

The market is climbing to new highs, and some market observers are voicing concerns about a possibility of a short-term correction and consolidation. This makes appealing a group of equities boasting defensive characteristics such as low-volatility of returns. Low volatility means that an equity’s returns over time do not deviate widely from their average return over that time, but, instead, change at a steady pace. Empirical evidence shows that low-volatility equities tend to produce higher risk-adjusted returns over a long-term horizon than high-volatility equities and the broad market benchmarks. In part, this outperformance is due to lower drawdowns during market downturns. In fact, according to Standard & Poor’s, back-testing has shown that the S&P 500 Low... Read more

Dividend-Yielding Cyclical Chemicals Stocks for Rebounding Growth

Companies in the chemical industry are highly susceptible to business cyclicality. This means that during expansions, they tend to be highly profitable at the peak of the cycle, while during contractions, their margins fall and profitability sags. While the overall economy has been in an expansionary phase for several years now, the pace of growth has been tepid at best. Both specialty and diversified chemicals makers have benefited from that growth, but the potential for more robust sales and earnings growth appears to be still ahead. According to American Chemistry Council, the global demand for specialty chemicals is expected to grow at above-average rates of 3.1% this year –double the rate in 2012– and 4.2% in 2014. The main growth drivers will be recovering automotive and... Read more

4 High-Yielding Regional Banks

Regional banking stocks have been long known as payers of dependable dividends. Their resilience even during the most severe financial distresses, such as the 2008-2009 financial crisis, testifies to their ability to pay and even grow dividends through all economic cycles. As the economic growth is expected to accelerate in the second half of this year, the outlook for regional banks is improving. A higher demand for consumer and commercial and industrial (C&I) loans, improving loan quality, and prospects for higher net interest margins bode well for these banks. For some, the improvement will be a progression from last year’s strong operational performance. SNL Financial, a business intelligence service provider with a particular focus on the financial industry, has... Read more

U.S. Jobs Recovery A Good Sign for These Dividend Payers

The U.S. jobs market has been on a bumpy and slow path to recovery. However, the latest U.S. payrolls data for April 2013, released by the Bureau of Labor Statistics, contained some good news. Payroll jobs increased above economists’ estimates, although the pace of job gains remains tepid at best. The upward revision of the employment gains in February and March –from 236,000 to 332,000 new jobs created in February and from a measly 88,000 to 138,000 jobs created in March– painted a picture of a stronger employment recovery in early 2013 than previously thought. What’s more, the unemployment rate continued its slow but steady decline, falling by 0.1 percentage points to 7.5%, its lowest since late 2008. The outlook is likely to continue to improve in the spring and... Read more

5 Prospective International Consumer Staples Plays Paying Decent Dividends

Stocks of consumer staples companies are generally recognized as defensive plays with low volatility and low correlation of returns relative to those of the overall market. Representing the companies with primary operations in food, beverages, tobacco and other household items, the consumer staples stocks are attractive due to the non-cyclical nature of their underlying business, which exhibits a tendency to do well in both good and bad times. Historically, the sector has offered slow and steady growth, and has paid respectable dividends. However, now, growth opportunities in international markets have invigorated the earnings growth of many consumer staples companies, with particularly robust growth by companies with significant or rising exposures to emerging markets. In fact, the... Read more

Risks and Opportunities in Waste Management Dividend Stocks

There are opportunities to earn respectable yield in waste management stocks, however investors need to be highly selective. While the overall industry earned $60 billion in revenues last year, the industry earnings were under pressure due to restructuring and acquisition charges, higher operating costs, and weak recycling prices. However, the outlook has now improved, and remains optimistic for the long-run. For example, TechNavio, a research and advisory arm of the London-based Infiniti Research Ltd., forecasts that the U.S. solid waste management market will expand at an annual growth rate of 3.4% through 2015. The rebounding residential fixed investment, driven by the housing recovery, is currently the key driver of U.S. municipal solid waste volume and pricing growth. Over the... Read more

5 Dividend-Payers with Lower Credit Risks than U.S. Treasuries

When it comes to credit risk, U.S. Treasuries tend to represent the safest of investment instruments. This means that the cost of insuring U.S. Treasury debt against the possibility of default is lower than the cost of insuring credit obligations of other insurers, including corporate debt, with the cost represented in terms of spreads on credit default swaps (CDS). However, there are corporations with an impeccable record of financial stability, earnings growth through different business cycles, and consistent dividend payments that are considered less risky than U.S. Treasuries in terms of a probability of default or some other adverse credit event. This lower credit risk implies CDS spreads below those of the U.S. Treasuries and thus the lower cost of insuring the high-quality... Read more

Risks and Opportunities for Long-Term Dividend Investors in Global Telecoms

Defensive consumer staples and healthcare stocks have been the primary drivers of the U.S. market’s rally so far this year. These sectors generally consist of non-cyclical companies that are known as consistent dividend payers over the long-term. Also faring well have been the two U.S. telecom giants, AT&T (NYSE: T) and Verizon Communications (NYSE: VZ), which have traditionally paid the highest dividend yields among the Dow Jones Industrial Average (DJIA) constituents. However, around the world, except most notably in Canada, the telecom sector operators, traditional cash cows and defensive dividend payers, have performed quite poorly. The worst hit are European telecoms, which, overburdened by excessive debt in a recessionary market... Read more

Falling Yen and Euro a Boon for These 5 Dividend Stocks

Falling currency values can enhance companies’ international competitiveness and export potential, thereby boosting business sales and EPS. Due to rising exports, the trend is also beneficial to GDP, which in turn further improves the operating environment for these firms. According to Financial Times, it is a general “rule of thumb” that a “10% drop in the Euro’s trade-weighted value will prop up Eurozone’s economic growth by slightly less than 1 percentage point, with the effect starting to be felt after six months.” Over the past few months, there has been a major depreciation in the value of the Japanese Yen and a decline in the value of the Euro relative to the trade-weighted basket of currencies and especially the U.S. dollar. Since October... Read more

The REIT Elite: Top REITs for the Long Haul

In its August 2012 issue of the “REIT Outlook”, titled The REIT Elite: Comfort Food for Investors, Chilton Capital Management identified a group of 11 REITs that represent the top of the crops in the REIT industry. These companies are “blue chip, core quality holdings” or “sleep at night, confidence-inspiring companies” “investors should buy for (their) grandparents, parents, and children.” The 11 REIT Elite members, on average, have posted superb cumulative total returns over the past decade, outperforming their respective benchmark, the MSCI REIT index, more than threefold over that period. The REIT Elite members, boasting some of the most flexible balance sheets in their industry, have a proven earnings power over long-time periods. In... Read more