Stocks opened higher Friday only to see all three major U.S. indexes slip into the red by mid-morning. No matter how stocks eventually close on the last trading day of the month, August marked a volatile period for U.S. markets as trade war fears mount amid broader global economic uncertainty.
The S&P 500 is on track to close August down roughly 1.5%, which would represent its worst month since May. Despite macroeconomic worries and growing recession speculation, U.S. consumers don’t seem afraid just yet.
On Friday, the Commerce Department said that U.S. personal-consumption expenditures popped a seasonally adjusted 0.6% in July from June, which marked a jump from the previous two months. Furthermore, U.S. third-quarter GDP estimates remain relatively strong at 2.3%. This would represent a jump from Q2’s 2% expansion, but down from 2018’s 2.9% total growth.
Despite the positive signs in the U.S., Germany, Japan, and other economic powers have government debt with negative interest rates. And of course the trade war between the U.S. and China could still drag the world’s two largest economies down.
Both President Trump and Chinese officials have seeming taken a more optimistic tone recently. But the specter of the ongoing trade dispute is likely to linger, especially with the new round of tariffs set to start on September 1.
Obviously big news in either direction could happen at any moment. For now, however, markets have likely priced in most of the current fears. Furthermore, investors and Wall Street still need somewhere to put their money, which is why yields on the 10-year U.S. Treasury note, often considered the world’s safest asset, have fallen over the last few months as investors pour in.
Yields on 10-year U.S. Treasury notes rested at 1.51% through morning trading Friday, down from just over 2% at the end of July. Therefore a phenomenon known as the Tina effect or “there is no alternative” to stocks remains in play.
With U.S. yields so low and many major global rates in the negative, investors should look for strong companies that pay a dividend. We found a few that inventors might want to consider buying, utilizing our Zacks Stock Screener…
Apple is an obvious pick here. The iPhone powerhouse has expanded beyond hardware in recent years. Tim Cook’s company has grown its services business and it is set to launch its streaming TV offering, Apple TV+, this fall in the hopes that it will be able to compete alongside Netflix NFLX, Amazon Prime AMZN, and others. Apple is projected to see its current quarter (Q4) and full-year fiscal 2019 earnings and revenue slip on slower iPhone and Chinese sales. Peeking ahead though, our current Zacks Consensus Estimates call for Apple’s Q1 revenue and EPS to jump on its way to a larger 2020 comeback.
Perhaps more importantly, AAPL currently pays an annualized dividend of $3.08 per share, with a 1.50% yield. This roughly matches the 10-year U.S. Treasury note at the moment. Apple also consistently ups its dividend payout and buys back billions of dollars worth of stock with its over $200 billion of cash on hand. Apple is currently a Zacks Rank #3 (Hold) that sports an “A” grade for Momentum in our Style Scores system. AAPL stock seems like as safe of play as a U.S. treasury at this moment, that also provides the possibility of some more serious returns down the road as there is nothing stopping the tech titan from rolling out another game-changing product to bolster its already lucrative portfolio.
Coca-Cola Company KO
Coca-Cola beat quarterly estimates this past quarter and upped its full-year organic revenue growth forecast. KO shares have soared 25% over the last 12 months—which crushes the S&P 500’s slight downturn—and currently rest right at their 52-week and all-time highs. Coca-Cola’s strong run comes as the beverage giant continues to successfully expands beyond its soft drinks. This includes the roll out its first-ever Costa Coffee ready-to-drink product in Great Britain after KO purchased the British coffee chain for $5.1 billion earlier this year. The company has also made investments in Gatorade PEP rival BodyArmor, introduced its first energy drink under the Coca-Cola brand, and much more.
Coca-Cola’s longer-term positive earnings revision activity helps KO earn a Zacks Rank #2 (Buy) right now. KO also rocks a “B” grade for Growth and is projected to see both its 2020 revenue and earnings climbed well above its current-year estimates, which are also expected to pop. Lastly, Coca-Cola’s annualized dividend sits at $1.60 per share, for a 2.91% yield right now. KO’s huge dividend yield alone makes it look highly attractive in our current rate environment.
MSFT is the world’s most valuable public company and has outperformed most of the so-called FAANG stocks over the last several years. The historic tech firm’s current annualized dividend of $1.84 is up roughly 10% from the year-ago period and 18% on a two-year stack. MSFT’s yield is currently the lowest out of this group at 1.33%. Yet, Microsoft’s 41% climb in 2019 has pushed down its dividend yield. And this growth, along with the potential for more, more than offsets the slightly lower yield.
Microsoft is currently a Zacks Rank #2 (Buy). The firm is also projected to see its fiscal 2020 and 2021 revenue surge 11% and 10.5%, respectively. Meanwhile, MSFT’s EPS figures are projected to climb 10% in its current fiscal year and 12.8% above that estimate in the following year. Investors should note that along with Microsoft’s growing cloud computing business, highlighted by Azure, its Office, Windows, and hardware units have continued to evolve and shine. Lastly, Microsoft has managed to stay mostly out of the U.S. government’s sights at a time when Google GOOGL, Facebook FB, and others could face somewhat serious intervention.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
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