The global economy remains unpredictable with a stronger dollar, fluctuating oil prices and a slowdown in Chinese economy. Investors also remain anxious following a disappointing Q2 earnings season as earnings growth for the S&P 500 index remained in the negative territory.
Moreover, investors continue to be skeptical about the current state of market affairs that are being dictated by the movement in crude prices.
Crude oil, which is a major indicator of global economic growth, has been extremely volatile in 2016. The fluctuation in the cost of the commodity made the markets highly risky and investors jittery.
In fact, the economy suffered a massive setback when the commodity tumbled a 13-year low of $27 a barrel in Feb 2016 due to a supply glut. However, it recovered significantly and touched the $50 per barrel mark in early June after most of the leading oil producers hinted at an impending cut on crude production. The surge in the benchmark crude was also driven by supply outages in Nigeria, Libya, Venezuela and Canada – countries that hold some of the world’s largest sources of crude.
Before the situation could fully stabilize, however, it took a turn for the worse yet again in the recently concluded second quarter. The reduction in crude production to the required levels failed to materialize, whereas the commodity supplies surged and reached the highest levels during the same time frame. This, in turn, led to a decline in commodity prices below the $40 per barrel mark. But over the past few trading days, West Texas Intermediate (WTI) crude futures have risen around 10% to above $45 a barrel on renewed expectations of a cap on production from the 14-member OPEC bloc and Russia.
Hence, under the mercurial circumstances, a wise investment decision for risk-averse investors would be to focus on value stocks (the stocks most likely to perform well based on valuation measures) offering high yields. As price appreciation of a stock is largely uncertain, it would be safe to invest in stocks that provide steady income in the form of regular dividends.
Value & Dividend
Opting for value stocks could be a wise idea as value investing offers an opportunity to enter the market and grab stocks that are trading cheap and have been overlooked by the majority of investors. On the other hand, some investors prefer stocks that offer dividend income as part of the total return.
Stocks that are inexpensive and also offer a decent dividend income are always attractive. This strategy may protect the investors’ portfolio from a disaster in the event of a massive economic downturn.
How to Pick the Best Stocks?
Selecting a dividend stock with cheap price and good prospects could be a daunting task. This is because one must consider not only the past performance of the company but also its potential for the future. A stock that has paid huge dividends in the past but may see troubled times ahead will obviously not fit the bill.
The choices could be narrowed down based upon a favorable Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and promising value metrics (Value Score of ‘A’ or ‘B’) using our new style score system. The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2 offer the best of both worlds.
Based upon the above criteria, we have selected four stocks that could be promising picks. Not only do these stocks have Zacks Rank #1 but also a value score of ‘A’ and a dividend yield of greater than 3%.
4 Stocks to Bet On
Golar LNG Partners Limited Partnership GMLPowns and operates floating storage regasification units (FSRUs) and liquefied natural gas (LNG) carriers under long-term charters in Brazil, the United Arab Emirates, Indonesia, and Kuwait.
This stock has dividend yield of 12.24%.
Midcoast Energy Partners, L.P. MEP gathers, processes, treats, transports, and markets natural gas, natural gas liquids (NGL), crude oil, and condensate in the United States.
This stock appears to have a dividend yield of 18.92%.
Enviva Partners, LPEVA is a master limited partnership that owns and operates wood pellet production plants.
The company has a dividend yield of 8.67%.
Outerwall Inc. OUTRprovides automated retail solutions primarily in the United States, Canada, Puerto Rico, Ireland, and the United Kingdom. The company’s other concepts and investments include identifying, evaluating, building, acquiring, and developing self-service concepts in the automated retail space.
This stock has a dividend yield of 4.59%.
The markets will continue to face severe downside risks as long as oil price remains volatile. Nonetheless, the long-term view remains positive. After taking all such factors into consideration, the aforementioned stocks seem to be good choices for investors in the current macroeconomic scenario.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MIDCOAST EN PTN (MEP): Free Stock Analysis Report
OUTERWALL INC (OUTR): Free Stock Analysis Report
GOLAR LNG PARTN (GMLP): Free Stock Analysis Report
ENVIVA PARTNERS (EVA): Free Stock Analysis Report
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