Dividend investors need not fear the Fed. According to data from Ned Davis Research, dividend payers have historically outperformed when the Fed raised rates. This of course goes against conventional wisdom, which says that interest-rate-sensitive assets get hit when rates go up.
Part of the reason this hypothesis is wrong, says Utility Forecaster Weekly editor Ari Charney, is the added help that yield investors get not just from dividends, but also reinvested dividends. Of course, investors on their part need to stick to stocks with resilient cash flow and manageable levels of debt.
Intel Corporation (NASDAQ:INTC) has had its fair share of troubles in 2015. Most of them have been linked to the major slump in PC sales. Things began to turnaround for the semi conductor giant in fall, as reflected by the 18% rally in the stock in the past three months.
Intel is the biggest chip maker in the world. If you use any personal computer, it’s more than likely there is “Intel inside.” The tech firm accounts for almost 80% of the market for microprocessors. However, the biggest challenge lately at Intel has been mobile devices. Mobile sales have dwarfed conventional PC sales more than ever before. This has resulted in a shift in Intel’s focus. And that shift is beginning to find success. Ironically, Intel’s new recipe for growth has been the exact opposite of what it has been doing all these years – sell more high-end server processors to piggy bank on the growing demand for IT infrastructure.
Intel Corporation (NASDAQ:INTC) can afford to make this slow transition. That’s because the firm has close to $12 billion in net cash and investments on its balance sheet. The tech giant currently offers a 2.73% yield. And more importantly, its 24 cents a share quarterly dividend looks primed for a hike in January.
AT&T Inc. (NYSE:T) is a pure dividend play. The telecom giant currently yields 5.6%, making it one of the highest-yielding stocks in the entire S&P 500. The huge payout has been a bright spot in a year when capital gains have been almost non-existent for a large chunk of the market.
AT&T is the country’s second largest wireless carrier, with over 100 million customers. The recent acquisition of DirecTV makes AT&T a major player in the satellite TV space. The massive customer base and enhanced bouquet of offerings should provide AT&T plenty of opportunities for high-margin cross-selling in the coming quarters.
Investors might ask, after shelling out $66 billion in cash and stock to buy DirecTV, why would AT&T still be interested in hiking its dividend? For starters, given its size, meaningful organic growth is a big challenge for AT&T. The only other way to keep investors happy is by showering them with cash. And AT&T has a long history of December dividend hikes. The company has been raising its dividend annually since 2004, including the tough period through the Great Recession. So look out for a potential declaration in the remaining few days of the year.