We’re in the midst of a market change, a shift from a trading environment that favors growth stocks to one that will favor value stocks. Investors should beware, as the shift will naturally entail high levels of volatility – witness the current correction situation we’re seeing in the NASDAQ, and the 8% fall in the S&P 500.
Mike Wilson, chief of US equity strategy at Morgan Stanley, believes the key point in the near future will be the actions by the US Federal Reserve. The central bank is now committed to ending quantitative easing, its asset purchase program which has underpinned its policy of market support for well over a decade now.
Wilson points out that the Fed’s change in policy has been in the air for months now, and that the markets have been slowly adjusting to the prospect. “40% of the Nasdaq having corrected by 50% or more…. the breadth of the market remains poor as it goes through the classic rolling correction under the surface as the index grinds higher,” Wilson noted.
Getting down to the immediate effect on investor decisions, Wilson adds, “Stocks are [still] a decent hedge against inflation, unlike bonds. However, certain stocks fit that billing better than others. In its simplest form, it means value over growth stocks or short duration over long – think dividend growth stocks.”
Heeding Wilson’s advice, we used TipRanks’ database to zero-in on two dividend stocks with high yields — 7% or better, along with long-term performance that has outpaced the broader markets. Each stock also holds a Strong Buy consensus rating; let’s see what makes them so attractive to Wall Street’s analysts.
TPG RE Finance Trust (TRTX)
The first stock we’re looking at, TPG RE, is a real estate investment trust (REIT), a class of companies long known as excellent dividend payers. That reputation comes for a quirk in tax regulation, which requires REITs to directly return a high portion of earnings to shareholders – and dividends are a convenient vehicle for compliance.
As of the end of 4Q21, TPG managed a diverse portfolio of real…