It would be great to have a crystal ball and see what 2016 will bring. But with so much volatility going on, many investors cannot look beyond the current quarter, especially after the abysmal third quarter that just ended. For momentum and income investors, there are some great dividend stocks out there that will protect your capital over the long-term and get you through volatile periods.
Volatile Markets to Get Even Worse
The third quarter was terrible with both the S&P 500 and Dow Jones Industrial Average notching up 7.6% declines. This is not surprising when you consider it was the worst quarter since 2011 with global equities shedding $11.0 trillion.
How bad was the third quarter? The third quarter was the first back-to-back quarter of earnings declines since 2009 and the first time since 2009 where revenues declined for three consecutive quarters. As we enter earnings season, investors have reason to fear that upcoming round of corporate results are going to be dreadful.
If investors are looking for a catalyst to propel stocks higher in the fourth quarter, they’ll need to keep looking.
The fact is; there is a lot to worry about. Weak economic data continues to come out of China and Japan, the plunge in oil prices and other commodities is adding fuel to the fire, and there is ongoing uncertainty about how rising interest rates will affect the U.S. and global economies.
Not the perfect recipe for earnings and revenue growth.
Cheap Stocks Could Be Expensive
Less than 10% of stocks in the S&P 500 are positive since the short-term high on September 17th. With so many equities in the red, investors can be forgiven for thinking there are a lot of bargains out there.
Investors need to be careful in a depressed, volatile, uncertain market like this one. Those looking to make up lost ground might be tempted to find high dividend-yielding stocks to protect their portfolio.
Admittedly, there are a large number of high dividend-paying stocks out there with annual yields above 35% and 45%. But there is always a trade-off. High yields come with higher risk. On one hand, it might be tempting to get a 40% annual dividend; on the other, it might sting to see your initial investment evaporate. Buy-and-hold investors are patient, but that stretches it.
If you’re looking for dividend stocks in this climate, focus on larger companies with dominant positions in stable sectors. As well as companies that can respond to market volatility. Better still; look for stocks that reward investors with long-term dividend growth and capital appreciation.
3 Top Dividend Stocks for Volatile Markets
American States Water Company (NYSE:AWR)
Don’t judge this company by its web site. American States Water Company (NYSE:AWR) provides water and electric services to residential, industrial, and other customers in the United States.
Through its utility subsidiary, Golden State Water Company, AWR provides water service to approximately 258,000 customers located within 75 communities throughout 10 counties in California. It also distributes electricity to approximately 24,000 customers in the City of Big Bear and surrounding areas in San Bernardino County, California.
Through its contracted services subsidiary, American States Utility Services, Inc., the company provides operations, maintenance and construction management services for water and wastewater systems located on military bases throughout the country through 50-year privatization contracts with the U.S. government.
American States Water Company’s share price has been bucking the downward trend of the broader markets; trading near $41.30. The company’s share price is up 11% year-to-date. It has also erased any losses that came as a result of Black Monday. Since the beginning of September, its share price has climbed 10.2%.
For income investors, American States Water Company provides an annual dividend of 2.17% or $0.90 per share. Incredibly, the company has been raising its annual dividend for the last 61 consecutive years.
The Procter & Gamble Company (NYSE:PG)
The Procter & Gamble Company (NYSE:PG) is a $195 billion behemoth. But its share price has taken a beating, down 18.5% year-to-date. That said; its share price is up 5.2% since the middle of September.
While the weak economic environment will continue to hurt the company’s performance over the coming months, the company is taking steps to bolster its long-term growth. That includes raising prices across the board; a $10.0 billion cost cutting plan; investment in its supply chain and innovation programs; and streamlining its product offering base.
Procter & Gamble pays an annual dividend of 3.68% or $2.65 per share. And it’s something investors can rely on. The company has not missed a dividend in the last 125 years. On top of that, it has increased its dividend annually since 2004.
Northwest Natural Gas Company (NYSE:NWN)
Many of the top stocks today are in utilities, which some traders view as a safe haven during periods of volatility and economic uncertainty.
Northwest Natural Gas Company (NYSE:NWN) provides natural gas to more than 700,000 commercial, industrial, and residential customers in western Oregon and southwestern Washington. It is the largest independent natural gas utility in the Pacific Northwest with $2.9 billion in assets.
Currently trading near $45.50, Northwest’s share price is down 6.5% year-to-date, but is up 6.7% since early September. The company currently provides an annual dividend of 4.06% or $1.86 per share.
For those not familiar with Northwest Natural Gas, it has raised its annual dividend for each of the last 59 years.