John Gress/Reuters
- Stocks with high dividend payouts have become more appealing after the slump in bond yields.
- Julian Emanuel, the chief equity and derivatives strategist at BTIG, shared a list of 12 stocks below-market valuations and dividend yields north of 3%.
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The recent chaos in financial markets is a blessing to investors who are optimistic that coronavirus-driven disruptions will be temporary.
Stocks suffered their biggest one-day loss since the financial crisis on Monday and have plummeted as much as 19% from their recent record high. At the same time, bond yields across all maturities fell below zero for the first time.
These simultaneous events have created an opportunity to buy stocks that pay rich dividends, according to Julian Emanuel, the chief equity and derivatives strategist at BTIG.
Ahead of Monday's historic drop in markets, he identified 12 stocks that commanded dividend yields north of 3% - well above prevailing rates in Treasurys. Additionally, these companies traded at valuations that were cheaper than the broader stock market, with the highest price-to-earnings ratio being 16.4 times.
Most importantly, their dividend yields - defined as payouts relative to share prices - are mathematically more attractive after Monday's sell-off in markets - provided these companies do not change their policies.
Emanuel's investing strategy comes with a word of caution: don't be a hero in this market environment. Volatility can persist for longer than any investor is ready for, especially if the coronavirus outbreak forces more disruptions to daily life and business activity.
"Don't chase, volatility works both ways, up and down," Emanuel said in a recent note. "Scale in, smaller than normal position sizes, commensurate with the heightened volatility."
His stock recommendations are listed below in no particular order, and all the data is as of March 1.