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Dividend-Paying Stocks you will want to own
Over the long-term, much of the absolute return from holding stocks has accrued due to dividends. Many investors, including institutions such as pension funds, rely on dividend income for cash flow. The financial stocks themselves have traditionally paid some of the highest dividend yields, but that is changing. As balance sheets weaken, banks are being forced to cut dividends. We think the yield-seekers will be looking for new opportunities and some will latch on to royalty trusts, especially on dips.
If we get a serious U.S. recession or a sharp global slowdown, crude oil may eventually drop below $100/bbl. In that case, the energy trusts are likely to fall along with the underlying commodity. We expect institutional buyers to be lurking around any major selling spree in these names. We have bought them well off their highs and we will buy more on any further weakness.
Additionally, we do like several select names in the energy sector at this time. Petrohawk (HE) is a pure play on a huge new natural gas find in Louisiana. Carbo Ceramics (CRR) helps oil companies get the last 50% of oil and gas out of a well, which is a difficult and specialized task.
We also expect defense-related themes to do well in any recession. American Science and Engineering (ASEI) is the last of the pure plays on explosive detection.
Excerpts from Spear’s Security Industry Analyst (SSIA).
Disclaimers:
TSR Pro recommendations are impersonal and not tailored to the investment needs of any specific individual and may not be suitable for your portfolio. Consult a financial professional before investing. There is substantial risk in all stock market investments including the risk of loss of all capital. Check all information carefully before making an investment. Past performance is not indicative of future return.
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