Markets
SUN

5 High Dividend Stocks to Survive Volatile Markets

The U.S. stock market's six-year Bull Run has continued for too long and runs the risk of high volatility in the near future. Though investors may begin to get comfortable, there is no denying the fact that the fourth quarter will likely experience certain macroeconomic headwinds that can aggravate later.

A multitude of factors are at play, testing the patience of investors and wearing them out. While the market is slowly adapting itself to the idea of the much-anticipated interest rate hike by the Fed, we won't know the impact of the actual repercussion until it finally hits.

Meanwhile, China, once the fastest growing emerging country, is proving to be a big bully regarding issues like equity bubble, dwindling forex reserve and devaluation of Yuan. Also, a sharp fall in commodity prices is leading to higher-than-expected demand cuts due to sluggish global economic growth.

The economic uncertainties currently gripping the market are enough to scare investors and compel them to take desperate measures for guarding their wealth. Ever since the stock market's sharp fall in last August, safety of money is topping the priority list of investors, irrespective of their investment techniques.

Dividend Investment

"A stock dividend is something tangible - it's not an earnings projection; it's something solid, in hand. Everything else is hope and speculation," American stock market titan Richard Russell stated in brutally simple language.

There are several benefits of dividend investing. Historically, the most prominent ones are that these stocks have outperformed the market, it is a cost-effective mode of investment, it helps avoid speculative investment and is a time-tested strategy for assuring long-term growth. Moreover, reinvesting dividends to buy more shares are grabbing enough attention as a key strategy to increase portfolio strength.

Measuring and Dodging Volatility

The VIX is "a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices." The index, moving opposite to market trends, is also known as the "fear-gauge" index. Though market volatility is currently at modest levels, growing macroeconomic uncertainties can trigger a chaos any time soon.

Presently, the VIX benchmark stands at 22.73 as of Dec 14, 2015, slightly above the safe level of 20. The VIX had closed at 40.74 on Aug 24, skyrocketing 45.3%. Such roller coaster movements can exert pressure on investors' attempt to protect their money.

While investing in stocks with high dividends may be a good scheme to reinforce your loss-aversion principle, playing the market to dodge volatility requires some extra cautious steps. Beta measures the extent to which a fund's return may be affected or how much the price fluctuates owing to market conditions. Investing in low-beta stocks is a clever trick that can be used to ride through turbulent times.

Keep It Simple

It's not rocket science to locate stocks that will please you with steady returns. However, the real challenge is to find the right combination that will compound your investment. Here at Zacks, we have combined three key parameters to help you find the right needles in the haystack that will sail you through difficult times.

In order to choose stocks with great prospects, we first used the Zacks Screener to find companies that offer a dividend yield of minimum 5%. Then we added the criterion of an average Beta of less than 0.75. This is because beta of less than 1 implies that the particular stock is relatively less volatile than the market. Finally, we applied our proven investment arsenal Zacks Rank condition to pick the winning combination for your portfolio.

5 High Yield Dividend Stocks with Low Beta

Spectra Energy Partners, LPSEP : This growth-oriented master limited partnership is headquartered in Houston, TX. The company owns and operates natural gas transportation and storage assets. It is one of the largest operators of natural gas pipelines and storage facilities in North America.

Zacks Rank: #2 (Buy)

Dividend Yield: 6.46%

Beta Value: 0.64

Select Income REITSIR : This is a real estate company which primarily owns and invests in net leased, single tenant properties. It has properties in Oahu, Hawaii and the mainland United States. Select Income REIT is headquartered in Newton, MA.

Zacks Rank: #2

Dividend Yield: 10.38%

Beta Value: 0.64

Sunoco LPSUN : The company operates as a wholesale fuel distributor. It supplies motor fuel to convenience stores, independent dealers, commercial customers and distributors. The company also operates convenience stores and retail fuel sites. Sunoco LP, formerly known as Susser Petroleum Partners LP, is based in Houston, TX.

Zacks Rank: #2

Dividend Yield: 8.28%

Beta Value: 0.37

Alon USA Partners, LPALDW : The company owns and operates refining and petroleum products marketing business. Its integrated downstream business operates primarily in the South Central and Southwestern regions of the U.S. It refines crude oil into finished products, which it markets mainly in West Texas, Central Texas, Oklahoma, New Mexico and Arizona. Alon USA Partners, LP is based in Texas.

Zacks Rank: #1 (Strong Buy)

Dividend Yield: 18.35%

Beta Value: 0.20

AT&T, Inc.T : This is a premier communications holding company. Its subsidiaries and affiliates are providers of AT&T services in the U.S. and around the world. The company offers the world's most advanced IP-based business communications services, the nation's fastest 3G network and the best wireless coverage worldwide, and also the nation's leading high speed Internet access and voice services.

Zacks Rank: #2

Dividend Yield: 5.6%

Beta Value: 0.39

Bottom Line

The market behavior may be unruly and not per your best interests; but when it comes to calming your thoughts, a safe bet is the most prudent strategy. Paying dividends on part of companies reflects their diligent capital allocation strategy, balance sheet health and underlying strength. When dividend payment is combined with low volatility metric, it adds that necessary resilience to your portfolio which will pull you through market whims. And finally, who does not like a constant source of steady income?

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 >>

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

AT&T INC (T): Free Stock Analysis Report

SUNOCO LP (SUN): Free Stock Analysis Report

SPECTRA EGY PTR (SEP): Free Stock Analysis Report

SELECT INCOME (SIR): Free Stock Analysis Report

ALON USA PTNRS (ALDW): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

SUN T

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More