Most market watchers believe that markets will stabilize by end-2015. However, they also expect volatility to continue on a day-to-day basis. In this environment, stocks offering high yields make for good choices.
Markets suffered heavy losses on Friday following heightened international concerns. The S&P 500 and the Dow both registered their worst one-day percentage declines in more than 3 weeks. More significantly, all benchmarks closed in the red for the week after 2 successive weekly gains. Following losses for the month of March, these losses once again raise questions about the kind of volatility stocks may have to face in the days ahead.
More Volatility Ahead?
The first holiday-shortened week of April saw 2 benchmarks registering weekly gains even as the Nasdaq declined. Despite last week’s losses, all benchmarks have gained over the month till date. Additionally, the CBOE Volatility Index (VIX), also known as the fear gauge of the markets, had moved lower recently. Such a movement signals a reduction in market volatility and consequently an increase in investor confidence.
But on Friday, the market’s fear gauge increased 10.2% to settle at 13.89. The VIX had gained in excess of 11% in early trading. This is a clear indication that volatility has returned to plague investors. Also, most of the data released last week was dismal in nature. Reports on housing, jobless claims, retail sales and CPI were uniformly disappointing.
Long-Term Fundamentals Strong
However, long term fundamentals of the US economy and equity markets remain firmly in place. The job situation continues to improve and the Fed is set to raise rates later this year. The economies of Europe, China and Japan continue to display weakness. It is widely expected that the US will power the world’s growth story this year.
Most market watchers believe that markets will stabilize by end-2015. However, they also expect volatility to continue on a day-to-day basis. In this environment, stocks offering high yields make for good choices. These stocks offer higher income in the current low-rate environment and also offer a cushion against equity market risks.
Moreover, dividend stocks are historically less volatile than non-dividend stocks and are proven outperformers over the long term. These stocks are a safe bet to create wealth, as the dividends generally act as a hedge against economic uncertainty.
These stocks provide downside protection by offering sizable yields on a regular basis. At the same time, all benchmarks have gained over the year to date. This is why it is crucial to pick stocks that offer high yields but also offer the promise of growth when the markets eventually pick up steam.
To identity stocks that are offering high yields along with good growth prospects, we have relied on our new style score system.
Our Growth Style Score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the growth investing space.
Based upon the above criteria, we have selected 3 stocks that could be promising picks. Not only do these stocks have a favorable Zacks Rank and offer high yield, they also a Growth Style Score of ‘A’ or ‘B.’
Sprague Resources LP (SRLP - Snapshot Report) operates as a supplier of energy and materials handling services. The company stores, distributes, and sells refined petroleum products and natural gas. Its products include home heating oil, diesel fuels, residual fuels, gasoline and natural gas.
Sprague Resources holds a Zacks Rank #1 (Strong Buy) and has a Growth Style Score of ‘B.’ The company has dividend yield of 7%.
Atlas Resource Partners, L.P. (ARP - Snapshot Report) develops and produces crude oil, natural gas and related liquids. Atlas Resource Partners operates in basins located across the U.S., including Colorado, Tennessee and Indiana.
Atlas Resource Partners holds a Zacks Rank #2 (Buy) and has a Growth Style Score of ‘A.’ The company has dividend yield of 14.9%.
Calumet Specialty Products Partners LP (CLMT - Snapshot Report) produces specialty hydrocarbon products in North America. Calumet focusses on processing crude oil into customized lubricating oils, solvents, and waxes used in consumer, industrial, and automotive products.
Apart from a Zacks Rank #2 (Buy), Calumet Specialty Products has a Growth Style Score of ‘A.’ The company has dividend yield of 10.4%.
Dealing with volatility is something investors may have to get used to in 2015. At the same the time, growth prospects cannot be ignored in an effort to hedge risk. This is why these stocks would make for good additions to your portfolio.
This article originally appeared at Zacks.com. Reprinted with permission. Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. Neither Zacks Investment Research, Inc., Physician's Money Digest, nor the information providers have any liability, contingent or otherwise, for the accuracy, completeness, timeliness, or correct sequencing of the information or for any decision made or action taken by you in reliance upon information or "Zacks.com," "PhysiciansMoneyDigest.com," or "HCPLive.com" or for interruption of any data, information or any other aspect of "Zacks.com," "PhysiciansMoneyDigest.com," or "HCPLive.com." The past performance of a mutual fund, stock or investment strategy cannot guarantee its future performance.