General Electric, which had been one of the most reliable sources of yield, just became less attractive after slashing its dividend.
For the investor fresh on the hunt for yield, Miller Tabak equity strategist Matt Maley has some tips. He says a stock has to tick three boxes for him to see it as a good high-yielding opportunity.
Three high dividend stocks to buy on the hunt for yield from CNBC.
The first is whether it pays a good dividend; the second is whether it has consistently increased its dividend over time. “Then the third one, especially in this type of scenario where the market has been sold off quite a bit, I look for stocks that are oversold and can give you a nice bounce,” Maley said Tuesday on CNBC’s “Trading Nation.”
Maley says two energy stocks, Chevron and Exxon Mobil, fit the bill.
“Those aren’t the sexiest names in the group and may not give you the most capital appreciation, but they both yield more than 4 percent and they both have increased their dividend every year for more than 30 years,” he said. “They’re getting quite oversold and actually they’re starting to turn up just over the last couple of days.”
Energy losses in October have dragged major players like Chevron and Exxon sharply lower. Those declines pulled their relative strength indexes below 30 earlier this month, the threshold that typically suggests oversold conditions.
Gina Sanchez, CEO of Chantico Global, says strong fundamentals in the energy space insulate those stocks from the headwind of a rising-rate environment.
“Energy is an interesting play right now because it is not as interest-rate sensitive and it’s being driven by its own fundamentals. I do believe that there’s a bit of a floor under oil prices, and I think that’s going to be beneficial to the energy stocks,” Sanchez said on “Trading Nation” on Tuesday.
Bond-sensitive sectors such as utilities, telecoms and energy often act as a source of yield in a low-rate environment. However, when rates are on the rise, they become less attractive as investors seek yield with less risk than the stock market.
Maley also likes consumer staples stock Kimberly-Clark as a high-dividend pick. It yields 3.8 percent and the company has increased its dividend every year for 45 years.
Kimberly-Clark has also become oversold this month. It has dropped 9 percent this month, dragging its RSI to below 40. The index dropped below 30 several times earlier in the month.