Consensus comes to the market that the next step of the US Federal Reserve will be curtailed. The bond markets, for example, are prices under the assumption that the Fed will achieve a minimum of two quarter percentage points of austerity this year due to the increasing risk of recession.
In our opinion, pessimism is not without reason. The US-China trade war is starting to hurt investor sentiment and, more importantly, is now forcing companies to lower their earnings forecasts.
As American business begins to feel the pain, a growing number of economic indicators are also red. The New York Fed & # 39; s, issued on Monday, showed the largest monthly decline since the last recession.
If these market readings are correct and the Fed is ready to lower interest rates, then it makes sense that equity investors seek shelter and add some security to their portfolios. Shares that generally perform better in a slowing economy are companies that regularly pay dividends. To help you on your way, we have selected the following two revenue-producing stocks to help move through market volatility:
1. NextEra Energy
It is not unusual for utility companies to outperform the market in times of need. Their business model based on recurring cash flows and their ability to pay regular dividends are some of the features that attract investors. That is the main reason that the utility sector remained one of the best performing companies this year with achieving more than 13%.
In this space, we especially love Nextera Energy Inc (NYSE :), the Florida-based utility that has been scaled up by providing clean energy. NextEra is the largest American supplier of renewable energy, which generates electricity from wind and sun. The company has a large pipeline company and growing storage for energy storage.
The big difference between NextEra and other traditional utilities is that the growth was not funded by a huge debt injection. Instead, the company cleverly used government subsidies and tax breaks that were offered to clean energy producers. It usually sells the output to old-school utilities, many of which must obtain power from green sources to meet state mandates.
NextEra Energy Price Chart
NextEra plans to invest $ 40 billion in its development projects by the end of next year. This should help fuel, especially at a time when the chance of renewable energy is huge and the company has already built up an impressive scale. The shares fell by 0.5% yesterday to $ 205.38, but this year have risen 19% compared to the profit of 17%.
With a dividend yield of 2.45%, NextEra pays an annual dividend of $ 5 per share. The company plans to grow it between 12% and 14% until the end of 2020.
Like utilities, real estate trusts or REITs, they are also a commitment to interest rate direction. Their return becomes attractive as soon as the interest on safe government bonds falls.
Welltower Inc. (NYSE :), one of the largest healthcare-focused REITs, is an attractive option to consider if you are looking for a higher yield. The company manages more than 1,500 properties and is focused on healthcare – a relatively safe bet within REIT due to the aging population in the US and increased spending on such facilities.
The portfolio has a good mix of facilities to take advantage of this shift, including retirement homes, outpatient medical facilities and long-term care. These revenue-generating streams are solid, especially when the US is going through a huge demographic shift, where 10,000 baby boomers are estimated to be 65 every day.
Welltower is already from this trend. The net result increased by 61% last year and is expected to grow another 29% in 2019 to around $ 1 billion, assuming the company meets the low end of its profit guidelines. The shares fell by 0.7% yesterday to $ 83.04, which only slightly dented, it is almost a 20% gain so far this year.
Over the past decade, this REIT has boosted the payout to $ 3.48 per share, which translates to a return of more than 4% at the current share price.
After a powerful rally in income-producing stocks fueled by low interest rates, these two names may not have much more room in favor. Both NextEra and Welltower are traded close to their 52-week highs and their valuations seem somewhat tense at the moment.
But if the bond market is correct and we will soon see an interest rate cut, we cannot rule out that there is another level higher in the values of these shares.