Stable High Dividends in Uncertain Market Phases
In uncertain market phases, investors often seek stable income sources to diversify their portfolio and minimize risks. High-dividend stocks provide an attractive way to generate passive income. Here are some important aspects and examples of stable high dividends:
Important Considerations
- Durability of Dividends: Investors should focus on companies that can maintain and continuously increase their dividend strategy over a long term. This is a sign of financial stability and a sustainable business strategy.
- Undervalued Quality Stocks: It is advisable to buy undervalued stocks with solid fundamentals, as these often offer better returns than overvalued stocks.
- Competitive Advantages: Companies with strong competitive advantages or economic moats tend to be better positioned to maintain their dividend strategy.
Examples of Stable High Dividends
- OneMain Holdings: This company from the US consumer credit market currently pays a dividend of about 8% and has continuously increased its dividend over the last five years. However, it carries risks due to interest rates and recession.
- US Dividend Stocks: Companies like ExxonMobil, Johnson & Johnson, Merck, PepsiCo, ConocoPhillips, Medtronic, and Lockheed Martin are considered stable dividend securities in the USA.
- High Dividend ETFs: These offer broad diversification and can achieve returns of over 10% per year. They are particularly interesting for investors looking for regular high payouts.
Risks and Challenges
- Market Risks: Even stable dividend stocks are not immune to market fluctuations. In recessionary phases, dividend cuts may occur.
- Interest Rate Risks: Higher interest rates can diminish the appeal of dividend stocks, as investors may switch to other investment forms such as bonds.
- Credit Risks: Companies with high dividend yields may also carry a higher risk of credit losses, especially if they operate in volatile industries.
Overall, stable high dividends offer an attractive way to generate passive income, but investors should research carefully and consider the risks.