Investors digested the sudden spike in volatility last week, bringing stock market indexes lower across the global financial markets. What arguably started with Japan’s interest rate hikes, which triggered an unwind in the so-called “Carry Trade,” has become top of mind for those looking to protect their portfolios. Someone has to return peace of mind to the market.
Companies do this by reiterating their faith in the future of their stock prices, as they expect a swift price recovery to follow after the sudden sell-offs. By increasing share buyback programs and dividend payouts, management sends a message to their shareholders centered around creating certainty and confidence in the future.
Three stocks that immediately raised their dividend payouts after the S&P 500 sell-off could be worthy of a second look for investors trying to protect their capital from the sudden whipsaws the market can deliver. Topping the list is a real estate investment trust (REIT) operating across America’s mall properties, Simon Property Group Inc. (NYSE: SPG), a gold bet in the face of interest rate cuts in AngloGold Ashanti Inc. (NYSE: AU), and a back up to safety in the iShares USD Bond Factor ETF (NASDAQ: USBF).
Simon Property Stock: A Steady Dividend for a Smooth Investment Ride
Despite what the e-commerce bulls may say, malls will be here to stay for at least a couple more generations. Food courts, movie theaters, trying on clothes in person before buying, and other activities are still up and running to push the uptrend for the consumer discretionary sector.
This strength is why management boosted Simon Property stock’s dividend payout by 2.5% to offer investors an annualized dividend yield of up over 5.0% today. This yield beats inflation in the United States, and bond yields have recently fallen below 4%.
Knowing that this asset class is steadier than most, investors might want to consider Simon Property’s management's vote of confidence in raising the dividend. After all, management isn’t alone in expressing its bullish views of the stock.
Victoria Spartz, a U.S. Congresswoman, reportedly bought between $50,000 and $100,000 worth of stock as recently as June 2024. Spartz is also part of the $4.9 billion of institutional capital that has entered the stock over the past 12 months. This is another vote of confidence for investors to consider.
Gold Stockpiling Fuels Confidence in AngloGold's Future Prospects
Countries like China, Turkey, and India have been stockpiling gold reserves. This might be a hedge against their foreign currency reserve in dollars or against the vast amount of U.S. treasury bonds they also hold. Whichever the case, it’s a vote of no confidence on the dollar’s strength for the coming quarters.
Knowing the scenes of this movement, analysts at Goldman Sachs have boosted their targets for gold up to $2,700 an ounce this year. Investors need to realize that this view is tied to the Federal Reserve (the Fed) looking to cut interest rates this year, which the CME’s FedWatch tool expects to be by September 2024.
Currency values are significantly driven by interest rates, so knowing that rate cuts are on the way, these nations are getting ready by stockpiling a dollar-quoted commodity like gold. This is why AngloGold management has also felt confident enough to boost their dividend payouts by 15.8%, to a total yield of 1.5%.
While the yield might not be as high as Simon Property’s, investors are trading income for upside. Wall Street analysts forecast up to 27.9% earnings per share (EPS) growth for AngloGold in the next 12 months, helping those at BMO Capital Markets boost their valuations to $34 a share, calling for a 14% upside from where the stock trades today.
Flight to Safety: Why Investors Are Flocking to iShares USD Bond Factor ETF
A dividend increase of 44.8% for investors will come as a massive income boost for those who understand what might happen next for bond prices as a result of interest rate cuts. Just like currencies are driven mainly by interest rate trends, bond prices move opposite to where rates go.
In this case, interest rate cuts will have a direct bullish effect on bond prices. This is why investors can now benefit from USBF's 4.8% annualized dividend yield and plenty of upside in the price of the exchange-traded fund (ETF).
There is also one Wall Street legend who has been into bonds lately, reportedly holding more capital in bonds than even the Fed itself. Warren Buffett now holds up to $234.6 billion in bonds, but he’s not alone in his bullish view of the fixed-income market.
Joining Buffett in his bonds crusade is Stanley Druckenmiller, who sold out of NVIDIA Co. (NASDAQ: NVDA) stock and reallocated it into bonds through a similar ETF. Here, investors can combine income and upside.
