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As markets wobble, buy the stocks that pay you back

As markets wobble, buy the stocks that pay you back



Stocks tumble with the Dow closing down more than 1,200 pointsReplayMore Videos ... (16 Videos)Stocks tumble with the Dow closing down more than 1,200 pointsKlarna CEO on 'buy now, pay later' competition from AppleStrategist explains why you should 'buy stocks when it feels terrible'Your next subscription could be to Subway. Its CEO explains how it'll workWalmart vs. Target: A tale of two retail resultsEconomist: Recent inflation data may not change Fed's planDoes Wall Street understand Netflix?Is the worst already over for stock markets? This strategist thinks soFrontier CEO sees growth opportunity after failed merger with SpiritBlackRock investment expert: Fed will start slowing interest rate hikesEx-treasury secretary makes prediction about future of US economyAmid inflation, economist warns avoiding recession won't be 'easy path'Citi chief economist: Recession risk is risingSchwab top strategist: Consumers 'much better prepared' for downturn compared to Great RecessionSuze Orman's tips for navigating inflation: Don't panic and continue to investHere's why bitcoin's drop has investors worriedNew York (CNN Business)Tuesday's massive stock market meltdown should serve as a reminder to investors that in times of turmoil, it pays to own shares of companies that also pay you.

Dividend paying stocks are in vogue again, even as long-term government bond yields have surged dramatically this year. Traders seem to be craving quality blue chips that offer steady (and often growing) dividends. These can be a more exciting investment than stodgy Treasuries. Quarterly or annual dividend payments provide good income streams for investors who need cash in the short-term. And for those playing the longer game, dividends can be reinvested to buy even more shares in those same companies.The S&P 500 High Dividend ET (SPYD)is down only about 4% this year and is up slightly over the past 12 months, a much better performance than the overall market. The S&P 500 has plunged more than 17% in 2022.The high dividend fund, as its name implies, has exposure to companies that offer big yields, such as energy giants Exxon Mobil (XOM) and Chevron (CVX). Both stocks have soared this year as oil prices have skyrocketed.Read MoreOther top holdings in the fund include Cardinal Health (CAH), Principal Financial (PFG) and tech services company Iron Mountain (IRM). All three stocks are in the green this year as well, with Cardinal Health surging 30%.Americans should brace for higher natural gas prices, Chevron CEO saysIt makes sense that dividend stocks are doing well in these tumultuous economic times. When a company pays a dividend — and continues to steadily increase it — that's a sign of financial stability."Dividend payers do well in times of inflation. Many of the stocks are high quality, blue chip players with pricing power and strong balance sheets," said Austin Graff, co-chief investment officer of Titelist Asset Management and manager of the TrueShares Low Volatility Equity Income ETF.As such, many consumer staples firms, i.e. food and beverage giants that can be counted on for dependable sales and profit growth, tend to be top dividend stocks. Keurig Dr Pepper (KDP) and Philip Morris (PM) both announced Wednesday that they were boosting their dividends, for example.Growth companies pay dividends, tooWith more market volatility likely ahead, investors who still want stocks over bonds can keep looking to dividend payers. Even the tech sector has its fair share of dividend plays, including Apple (AAPL), Microsoft (MSFT) and Oracle (ORCL).Graff said investors looking tor dividend stocks need to focus not just on their yields, however. Because the dividend yield is the annual payout divided by the share price, higher yielding stocks often are so-called value traps, companies with a plunging stock price. Graff said he prefers companies with decent, although not sky-high, yields that are also steadily increasing their dividends. Investors can find businesses that are able to generate sales and earnings growth at a healthy clip. Some examples? Graff owns UnitedHealth (UNH), utility American Electric Power (AEP) and cybersecurity firm NortonLifeLock (NLOK), in the fund. How do you like them Apples? Stock could get an iPhone 14 popUnitedHealth's dividend yields 1.2%, NortonLifeLock's yield is 2.2% and American Electric Power has a yield of 3%. So the yields are still low enough — less than the current 3.4% rate for a 10-year Treasury bond — that there is room to keep increasing the dividends even as the companies invest in their businesses to keep profits rising."These are not just companies with nothing better to do with their cash," Graff said.So it's no longer the case that dividends are just for conservative investors or retirees on a pension or other fixed income."If you were asked to picture a typical dividend investor, you would probably conjure an elderly widow or widower," Jack Ablin, chief investment officer of Cresset Capital, said in a report earlier this month. "But now that monetary policy is tightening, dividends are taking center stage again. Investors reckon that dividends offer a modicum of certainty in an otherwise uncertain investing environment."


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