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The top dividend stocks to own this week could benefit from a central bank policy that leaves interest rates "lower for longer."
The U.S. Federal Reserve has cut interest rates three times this year. But ahead of its monthly meeting yesterday, it was clear the Fed would try to keep rates where they are for the foreseeable future.
The Fed is prepared to let the U.S. economy run hot in order to boost inflation. But fixed-income investors have to wonder what lies ahead. The 10-year U.S. bond sits below 1.8%. Retirees and anyone looking to avoid an overheating market want to find the stocks with the best cash flow and dividends for the long run.
That's why, every Thursday, I'm looking at dividend and income opportunities that will attract investors as the Fed keeps rates low.
Here are the dividend stocks catching my eye right now. You may know this first one, but I'll tell you whether it lives up to the hype...
Is Credit Suisse a Top Dividend Stock?
Credit Suisse Group AG (NYSE: CS) is making waves by hiking its dividend this year, but there's more to this story than a fatter dividend check.
While Brexit dominates headlines today, investors should instead focus on the stability of the European banking sector. German banking giant Deutsche Bank AG (NYSE: DB) continues to shed assets and employees in order to stabilize.
Meanwhile, its Swiss rival, Credit Suisse, just cut probability targets for 2019 and beyond. The bank blames negative interest rates, a decline in M&A, and trade tensions for its future uncertainty.
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That said, the Swiss bank plans to launch a $1.5 billion buyback program to complement plans to increase dividends. In fact, the bank says it wants to distribute roughly 50% of its 2020 net income back to investors. The firm says it will likely hike dividends by 5% per year.
Investors are better off avoiding the hype around Credit Suisse right now. Simply because a company is taking action on its dividend and boosting buybacks doesn't make it a good long-term investment.
Instead, here's where you'll find the best dividend stocks right now...
These 2 Dividend Stocks Are Getting a China Boost
Investors continue to speculate on how to play a trade deal between the United States and China. Some have purchased semiconductor stocks and hoped for a pop if both sides reach a deal. Others have shorted manufacturing stocks and hoped for a decline, should the Trump administration hit China with tariffs on Sunday.
Dividend stocks are a great alternative here. And we're eyeing two companies that pay very strong dividends given their recent pullback in share price. Investors can buy these stocks, collect the income, and wait over a longer horizon for the share prices to recover.
First up: FedEx Corp. (NYSE: FDX). The global shipping leader pays a dividend yield of roughly 1.6%, but the price has pulled back dramatically over the last year. The company hauls more packages around the globe than anyone, so an ongoing trade dispute is a major risk factor that will continue to undermine short-term confidence. Shares have fallen from $275 to $155 over the last 18 months. But smart investors looking to capture a reliable dividend and the upside of a post-trade pact should consider the stock today.
Meanwhile, China Mobile Ltd. (NYSE: CHL) pays a very solid 4.86% dividend yield. Shares are off about 50% since the start of the trade war. In fact, the stock has fallen to its lowest level since 2012. The ongoing trade dispute, concerns about China's economy, the Hong Kong protests, and general uncertainty have weighed on the stock.
However, China Mobile is a stock with upside of about $50, and it pays a rock-solid 4.8%. Should a trade deal come across Trump's desk this weekend, CHL stock could rally next week. This is a bet on the long-term stability of China, and with 5G on the horizon, plus its booming population, this looks like a heck of a long-term bet for the years ahead.
While FedEx and China Mobile offer solid dividends, this next dividend stock could be even more promising long term...
The Best Dividend Stock This Week
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Realty Income Corp. (NYSE: O) has increased its monthly dividend for the 104th time in its history. This figure includes 89 straight quarterly increases to its investor payout. The company now pays out roughly 3.65% annually, a figure that will continue to increase given the firm's continued commitment to returning cash to investors.
More important, Realty Income is generating this cash flow from one of my favorite ways to make money in a low--interest rate environment: REITs. It churns this cash flow from more than 5,900 real estate properties owned under long-term lease agreements with commercial tenants.
REIT investing is one of the best ways to capture income in the year ahead. With interest rates remaining lower for longer, real estate assets will continue to pay cold hard cash and appreciate in value as investors look for strategic places to allocate capital in this new reality.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.