HomeMost PopularMaximizing Dividends in a Shifting Market: Insights from Steven Cress

Maximizing Dividends in a Shifting Market: Insights from Steven Cress

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Are you an investor seeking to optimize your returns even in turbulent times? In this episode of the Seeking Alpha Investing Experts podcast, Steven Cress, Head of Quantitative Strategy at Seeking Alpha, shares his expert insights on the best dividend stocks to consider when the markets are sliding.

When it comes to dividends, Cress advises investors to focus on growth and safety rather than high yields. In a market with soaring money market yields, dividend stocks still prove to be attractive options. But caution is necessary when chasing high dividend yields, as they can indicate increased risk.

In light of the current market landscape and economic environment, Cress emphasizes the importance of understanding the potential risks associated with companies offering high dividend yields. Factors such as slowing economic growth, rising debt levels, and higher costs can impact businesses and lead to dividend cuts or suspensions.

To minimize these risks, Cress recommends focusing on companies that demonstrate dividend growth and safety. Seeking Alpha’s back-tested metrics have shown that stocks with strong dividend safety grades (A+ to A-) have averted 99% of dividend cuts. Even stocks with a slightly lower safety grade (A+ to B-) have successfully avoided 98% of cuts.

Aiming for dividend stocks with a safety grade above B- can provide investors with a high level of comfort, knowing their dividends are less likely to be reduced. Steer clear of stocks with safety grades below C+, as they have historically been more prone to dividend cuts.

So, why should investors consider dividend stocks despite the allure of money market accounts and the safety of treasuries? Cress explains that dividend stocks offer stability, reliability, and the potential for strong yields and dividend growth rates. They can act as a buffer against market volatility, inflationary pressures, and portfolio losses.

Furthermore, dividend stocks have the potential for capital appreciation based on the company’s business and sector, which can’t be achieved with bonds or treasuries.

While headlines and market sell-offs may create uncertainty and frenzy, this time of year is actually a seasonally good period to buy stocks. Stocks often experience discounts and can provide significant yields. The average yield of the 14 dividend stocks recommended by Seeking Alpha is an impressive 3.94%, compared to the S&P 500’s 1.52% yield and the Vanguard Dividend Appreciation Index’s 2% yield.

Despite the market’s predictions and speculations regarding potential Federal Reserve rate hikes, dividend stocks remain an attractive option for investors. By targeting companies with strong fundamentals, positive dividend safety metrics, and healthy dividend growth potential, investors can position themselves for success.

In conclusion, Cress advises investors to resist the temptation of chasing monster dividend yields and instead focus on dividend growth and safety. By doing so, investors can strike a balance between dividend income and potential capital appreciation, ensuring a win-win situation.

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