The overall market remains upbeat, but volatile. The ongoing trade war and uncertainty over interest rates will keep the market on edge, but with overall economic conditions remaining favorable investors should continue to keep the money at work in the market.
Most investors have come to accept that there will not be a quick solution to the current trade war. The market has reacted very positively on any news of progress in the negotiations, only to sell of just as quickly on reports that negotiations have stalled. While it is in best countries' best interest to reach a deal, neither appears overly anxious to compromise on their positions.
The Federal Reserve cut rates once this year already, and there are signals that another rate could be coming before the end of the year. President Trump has repeatedly criticized the Fed for not lowering rates, but the Fed will definitely not make any huge or rapid cuts to appease Trump. Economic conditions remain upbeat, and if the Fed decides another rate cut is needed to keep strength in both the U.S. and the global economy it will do so, but it will be a slow process.
Lower interest rates and a volatile trade situation will keep investors looking for safety, and dividend stocks are good place to find protection. Here are four dividend stocks you need to own as market volatility continues.
The telecom market is very competitive but strong barriers of give the sector's top players significant pricing power and has allowed modest earnings growth despite the sector's saturation. Like most utilities, Verizon (VZ) offers investors a sizable dividend in order to outweigh the modest earnings growth. The company has grown earnings at an annual rate of 6% over the last five years and looking ahead profits are forecast to rise 3% per annum over the next five years. VZ trades at just 12.2 times future earnings. The low valuation is in response to the low growth estimates, but to keep investors interested Verizon offers a hefty 4.1% yield and the company has boosted its payout each of the last 12 years. VZ is now trading just shy of its all-time high set after the company's better than expected second-quarter earnings. VZ is currently trading at $59.92 with an average price target of $61.34.
Discover Financial (DFS)
A strong overall economy with unemployment has kept consumer confidence and spending strong, and credit card operators like Discover Financial (DFS) have enjoyed strong growth. Not only are consumers spending, they are running record levels of credit card debt, and card operators have experienced major earnings grow in recent years. Discover has grown profits at an annual rate of 12% over the last five years and looking ahead analysts expect more of the same with forecast earnings growth of 10.4% per annum over the next five years. The stock offers a 2.1% yield and the company has boosted its dividend each of the last eight years. With a low 22.5% payout ratio the company can easily afford to continue boosting its payouts in the years ahead. The stock currently trades at less that 10 times earnings, which combined with double digit forecast earnings growth makes the stock an incredible value in addition to its income potential. DFS trades at $83.54 with an average price target of $91.69.
Since restarting its dividend program, tech giant Apple (AAPL) has boosted its distribution each of the last six years and currently offers investors a 1.4% yield. Apple has a huge cash war chest and a very low 26% payout ratio which should lead to steady dividend increases in the future. The company is dealing with slowing iPhone sales globally, but over the last couple of years it has done a good job building its services division which will continue to drive revenue moving forward. The company is about to launch its Apple TV Plus streaming platform, which comes with a $4.99 a month price tag, and it is also getting ready to launch Apple Arcade gaming platform. Earnings despite slowing smartphone sales, the impressive growth in the company's services division has analysts expecting annual earnings growth of 9.7% over the next five years. AAPL is a good value at just 18 times earnings and analysts have an average price target of $221.72 in-line with the stock's current price of $221.41.
Wells Fargo (WFC)
Banking giant Wells Fargo (WFC) currently offers a juicy 4.2% yield, with the bank boosting its quarterly distribution each of the last seven years. Wells Fargo came under intense scrutiny after multiple scandals producing over 2 million fake accounts to artificially inflate sales targets. Wall Street can have a short memory, and Wells Fargo has already started to recover. The stock is trading a big discount at just 10 times earnings. Earnings growth has been modest in recent years as the company put the fake account scandal behind it but looking ahead analysts expect to see the bank grow earnings at an annual rate of 7.8% over the next five years. The low value and high yield make Wells Fargo a strong dividend buy. WFC trades at $48.84 with an average price target of $50.16.