High-yield dividend picks for changing markets – Magic Post

The concept of market relativity is more vital than ever in today’s economy, as the days of individual price movements in different asset classes and even stocks are gone. With advances in data connectivity and technology, traders across the financial sector have found ways to connect the dots in almost all markets, and this is one thing that big hedge funds and investment bank traders are getting right.

In relative terms, investors can focus on changing preferences between different markets, especially when taking into account what is considered the next best thing. For example, the 10-year US Treasury bond yield is typically considered the “risk-free” rate, the benchmark by which all other potential returns and risks are viewed.

That’s why, as new bonds become more likely to rise, investors should brace themselves for the rotation that is likely to follow. Especially the rotation back into dividend stocks as bond yields become less attractive next to these names. Names like Schwab US Dividend Stock ETF NYSEARCA:SCHD, Exxon Mobil Company New York Stock Exchange: Gold As one of the leaders of the energy sector, and even Whirlpool company New York Stock Exchange: WHR.

A diversified way to trade dividend stocks

Some investors find that owning individual stocks can become a headache due to capital requirements and risk tolerance. This strategy involves keeping up with individual company developments, earnings, price movement, and everything else that managing a focused portfolio entails.

That’s why the Schwab US Dividend Equity ETF could be an attractive proposition. They are well enough diversified across various sectors and industries, giving investors a comparatively smoother ride for their allocations. Investors can see that this ETF trades slightly lower as bond yields have risen recently.

This price move, which sent the ETF down nearly 10% from its 52-week high, was because its dividend yield couldn’t justify the additional equity risk when bonds started offering 4.6% again. However, paying $2.56 per share brought the yield to 9.3% today, which is starting to attract the attention of new buyers.

As of November 2024, MML Investor Services insiders have decided to boost their holdings in this dividend fund by up to 5.9%, bringing their net position to a high of $145.6 million today. These weren’t the only buyers this month; High Tower Advisors boosted its stake by 0.4% to $138.5 million as well.

The risk-reward settings favor oil stocks

There’s a reason Warren Buffett decided to buy up to 29% of it Occidental Petroleum Corporation (NYSE OXY): He realizes that the upside potential of the energy sector is unparalleled. Even hedge funds have begun buying oil futures to increase their inventory in case prices rise from current cyclical lows.

However, not all oil stocks are manufactured the same way. Exxon Mobil shares have an inherent advantage: They carry a lower beta, which means they are less volatile and, therefore, more attractive during this rotation from low bond yields to the next best thing.

This low beta exposure, combined with Exxon’s $3.96 per share dividend payout, should make today’s 3.7% dividend yield an attractive proposition when the rotation from bonds hits the market. This is especially true as investors realize that it is not just about low volatility and income potential but also upside.

Wall Street analysts, especially those from UBS Group, were willing to publish their optimistic forecasts for Exxon Mobil shares. As of December 2024, they view Exxon Mobil as a buy and have put a $147 per share rating on it, demanding as much as 38% of where it trades today.

Discount will not last in Whirlpool stock

as The mortgage market index fell to its lowest level in 1996It was followed by sub-names in the real estate sector, indicating a decline in demand and activity in the housing sector. That’s why investors could see Whirlpool stock trading at discounts to the rest of the consumer discretionary sector today.

With a price-to-book (P/B) ratio of just 2.5x, Whirlpool shares are well below the industry average multiple of 5.6x today. This discount, coupled with its 6.1% dividend, makes Whirlpool stock a potential buy for investors looking to successfully shift from bonds to more attractive income-generating assets with some additional upside.

This theme is reflected in recent institutional buying activity for Whirlpool shares, led by that of Charles Schwab with a 14.7% increase as of November 2024, bringing them to a net position of $216.1 million or a 3.6% ownership in the company. If the stock was cheap enough for the bank running this dividend fund, it’s certainly cheap enough for investors today.

Before you consider ExxonMobil, you’ll want to hear this.

MarketBeat tracks the highest-rated and best-performing research analysts on Wall Street and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches up… and Exxon Mobil wasn’t on the list.

While Exxon Mobil currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

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