There is an old saying that “when the going gets tough, the tough go shopping.” And the same is true for investors, suggests Sam Stovall, chief investment strategist for CFRA Research in the firm's flagship newsletter, The Outlook.
Income-oriented investors have always been advised to think like a landlord, not a trader, reminding themselves that they shouldn’t price their unit on a daily, weekly, or monthly basis.
Instead, their goal should be to find the tenant 1) with the ability to afford the highest rent, 2) who will continuously pay that rent, and 3) that preferably has no problem with annual rent increases.
With the S&P 500 down 12% through February 24 and many sub-industries and companies off even more than that, opportunities to purchase stocks that pay increasingly attractive dividend yields have expanded.
Now we see four of the 11 sectors in the S&P 1500 — consumer staples, energy, real estate, and utilities — yielding in excess of 2.5%, or at least a full percentage point above that for the S&P 500.
What’s more, nearly 50% of the 148 sub-industries in the 1500 now sport above-market yields, with 22 yielding 3.0% or more, led by Alternative Carriers, Integrated Telecommunication Carriers, and Mortgage REITs.
Of course, if the yield looks too good to be true, it probably is. So analyst opinions should also be considered. Eight stocks with favorable CFRA STARS of 4 or 5, yields of 3.5% or more, and S&P Quality Rankings of B+ or higher are: Amgen Inc. (AMGN), Conagra Brands (CAG), Federal Realty Investment Trust (FRT), ONEOK Inc. (OKE), Philip Morris Int’l. (PM), Realty Income (O), Kraft Heinz Co. (KHC), and Whirlpool Corp. (WHR).
