Black Friday deals on these 3 dividend games

Black Friday deals on these 3 dividend games

Black Friday deals started extra early this year at places like Walmart, Target, and Amazon. – MarketBeat

In the US stock market, the Black Friday sale started even earlier – on October 13 to be exact. That’s when the S&P 500 took a six-day losing streak to a new low in 2022.

The index has since bounced back on the back of some cooler inflation numbers and better-than-feared third-quarter earnings. If the S&P can end this month, it would be its first two-month profit streak since August 2021. Hey, the recovery has to start somewhere!

Despite the recent rally in the bear market, the S&P is nearly 20% off its all-time high. This means there are plenty of bargains to be had this holiday season.

And thanks to the reduced prices, investors also have the opportunity to earn nice returns on above-average dividend payers. Here are a few of our favorites for the growth and income shopping list.

What is a good oil supply?

Like most energy names, Devon Energy Corporation (NYSE:DVN) has had a strong year, but is currently trading about $10 off its peak. The future dividend yield is no less than 7.8% and well above the industry average of approximately 4.2%.

Better yet, Wall Street remains mostly bullish on the stock despite its massive two-year run. Some price targets suggest that Devon Energy is poised to hit $100 for the first time since 2008.

As one of the largest shale oil producers in the country, Devon Energy’s earnings per share (EPS) doubled year over year in the third quarter, beating consensus. Higher realized selling prices of crude oil and natural gas together with higher production were the driving force behind the result.

But with investors aligned with current developments in the oil and gas market and rotating to underperforming sectors, Devon Energy has slipped back below $70. Crude oil futures fell below $80 last week on weakened demand prospects linked to recession fears and Covid outbreaks in China.

But as oil volatility has been the norm since the start of the pandemic, prices could rise quickly. Europe’s plan to ban imports of Russian crude starting next month and OPEC’s goal of limiting supplies could achieve $100 worth of oil this winter.

This would be welcome news for a low-cost producer like Devon Energy, which can profit from oil prices above $30. With the stock’s forward P/E ratio of 7.8x matching the yield of 7.8% , the stars line up for upward direction.

Has Verizon Communications stock bottomed out?

Verizon Communications Inc. (NYSE: VZ) is down 26% since the start of the year. Heavy promotional activity to lure wireless customers away from competitors has weighed on revenue. At the same time, a weak economic outlook could hurt earnings well into 2023. The Street expects year-over-year declines in earnings per share in each of the next four quarters.

So why invest here? At this point, the macro headwinds appear to be priced into Verizon stock. And after better-than-expected results in the third quarter, the bottom is almost or even within. Improved subscriber stats and benefits from the Tracfone acquisition drove a top and bottom line beat. Since the Oct. 21 report, the stock is up $4 from its low.

Technical analysis also shows that Verizon is oversold. A view of 10,000 feet on the monthly chart shows that the price is well outside the lower Bollinger band. Historically, uptrends followed such extreme dips.

Verizon’s recovery is likely to be slow and protracted as the market assesses the impact of a potential recession on wireless consumer and business demand. But with a 6.8% dividend yield well above that of rival AT&T, this is an easy buy and hold call.

What will boost Simon Property Group’s comeback?

Simon Property Group (NYSE: SPG) offers one of the highest term returns in the S&P 500 at 6.1%. It has raised its dividend in each of the past two years to emerge from the pandemic.

After an 87% increase in 2021, the mall and premium outlet REIT is discounted by 25% this Black Friday. The Fed’s rate hike campaign has had a twofold effect on the company.

First, higher rates mean higher borrowing costs, which limits Simon Property Group’s ability to purchase or develop retail properties. And since investors expect some level of growth for the risk they take, anything limiting growth is cause for concern, especially if you have more than $30 billion in debt.

Second, higher interest rates harm consumers’ ability to save and negatively impact discretionary spending. Shopping centers in tourist cities could be hit hard by a prolonged recession.

Yes, the Simon Property Group’s dividend is under pressure due to its weakened balance sheet and macroeconomic outlook. But there is reason to believe that the payoffs are sustainable and a rebound is inevitable.

Management is taking steps to improve finances and weather the storm for better days. The company exited the third quarter with $8.6 billion in liquidity and comfortable funding ratios.

In addition, as economic conditions improve, Simon Property will have more than just physical resources to drive growth. Investments in e-commerce in the US and expansion into Japan and South Korea will improve sales and diversification. In the meantime, a pattern of dividend increases should continue to attract Black Friday income buyers.

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