Buy stocks that pay you back

Dividend-paying stocks are back in vogue, even as long-term government bond yields have risen sharply this year. Traders seem to want quality blue chips that offer sustainable (and often growing) dividends. These can be more exciting investments than treasuries.

Quarterly or annual dividend payments provide good income for investors who need cash in the short term. And for those playing the longer game, dividends can be reinvested to buy more shares in those companies.

The S&P 500 High Dividend ET (the spear)It is down about 4% this year and has risen slightly over the past 12 months, a much better performance than the overall market. The S&P 500 is down more than 17% in 2022.
The high dividend fund, as its name suggests, has exposure to companies that offer strong returns, such as energy giants. Exxon Mobil (XOM) and Chevron (CVX). Both stocks have risen this year as oil prices have risen.
There are other major holdings in the fund Cardinal Health (CAH), Major Finance (PFG) and technology services company Iron Mountain (MRI). All three stocks are in the green again this year, with Cardinal Health up 30%.

It makes sense that dividend stocks do well in these turbulent economic times. When a company pays a dividend, and it continues to increase, this is a sign of financial stability.

“Dividend payers do well in times of inflation. Many stocks are high-quality, blue-chip players with pricing power and strong balance sheets,” said Austin Graff, chief investment officer at Titelist Asset Management and manager of TrueShares Low Volatility. Equity Income ETF.
As such, many consumer products companies, such as food and beverage giants that can be relied upon for reliable sales and earnings growth, tend to be top dividend stocks. Nice Dr. Pepper (KDP) and Philip Morris (AFTERNOON) both announced that they were increasing their dividends on Wednesday, for example.

Growth companies also pay dividends

With more market volatility likely, investors who still prefer stocks over bonds may continue to look to dividend payers. The technology sector also has dividend participation, among others Apple (AAPL), Microsoft (MSFT) and the oracle (ORCL).

Graff said investors looking for dividend stocks should focus on yield and not yield. Because the dividend yield is the annual payment divided by the stock price, higher-yielding stocks are often called value traps, companies whose stock prices fall.

Graff said he prefers companies with decent, if not very high, dividend yields that are steadily increasing. Investors can find businesses capable of generating sales and earnings growth at a healthy clip.

Some examples? It’s Graff United Health (UNH)availability American Electric Power (AEP) and cyber security company NortonLifeLock (NLOK)in the background
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UnitedHealth’s dividend yields 1.2%, NortonLifeLock’s yield is 2.2%, and American Electric Power’s yield is 3%. So yields are still low enough — lower than the current 3.4% rate on a 10-year Treasury bond — that there’s room to keep raising dividends even as companies invest in their businesses to keep profits growing.

“These are not just companies that have nothing better to do with money,” Graff said.

So dividends are no longer just for conservative investors or retirees with a pension or other fixed income.

“If you were asked to picture a typical dividend investor, you’d probably come up with an elderly widow or widower,” Jack Ablin, chief investment officer at Cresset Capital, said in a report earlier this month. “But now that monetary policy is tightening, dividends are taking center stage again. Investors believe that dividends offer some certainty in an otherwise uncertain investment environment.”