Dividend Stock-ing Stuffers

Health, happiness, and prosperity are synonymous with the holidays, making this "a most wonderful time of the year" for retailers and consumers alike.

Nearly two-thirds of the U.S economy is driven by consumer spending, a proxy for the overall health of the economy. In this month's "Chart of the Month," Sandy Pomeroy points to a recent Gallup poll suggesting that this holiday season, consumers intend to spend nearly as much on gifts as they did during the pre-financial crisis years. She believes consumers are full of holiday cheer for a number of reasons including a strong dollar, lower gas prices, higher wages and a robust jobs market - all which bode well for consumer sentiment and discretionary spending.

Americans Look to Increase Holiday Spending This Year

Source: Pavilion Global Markets (Gallup)

Implications for Investors

Pomeroy believes that value stocks with stable dividends in areas that have not kept up with large growth stocks in recent years may be the ultimate stock-ing stuffers. These include businesses that support the growth of e-commerce and include logistics operators; media/electronics/entertainment businesses; and parcel delivery service companies. These securities exhibit strong free-cash flow growth, a precursor for increased dividend distributions and a key ingredient for navigating the upcoming rising rate environment.

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