Black Friday deals started early this year at places like Walmart, Target, and Amazon.
In the US stock market, Black Friday sales started even earlier – October 13 to be exact. That’s when the S&P 500 went on a six-day losing streak to hit a new low in 2022.
The index has since rebounded on fresher inflation readings and better-than-expected third-quarter earnings reports. If the S&P can finish this month, it would be its first two-month winning streak since August 2021. Hey, the recovery has to start somewhere!
Despite the recent bear market rally, the S&P is nearly 20% off its all-time high. That means there are plenty of bargains to be had this holiday season.
And the discounted prices mean that investors will also have the opportunity to cash in on good returns on above-market dividend payers. Here are some of our favorites for the “growth and income” shopping list.
What is a Good Oil Stock?
Like most energy names, Devon Energy Corporation Inc (NYSE:DVN) had a strong year, but is currently trading around $10 off its high. The forward dividend yield is a whopping 7.8% and well above the industry average of around 4.2%.
Even better, Wall Street remains mostly bullish on the stock despite its huge two-year run. Some price targets suggest that Devon Energy is destined to hit $100 for the first time since 2008.
One of the nation’s top shale oil producers, Devon Energy’s third-quarter earnings per share (EPS) doubled year-on-year and beat consensus. Higher realized selling prices for crude oil and natural gas as well as an increase in production contributed to the result.
Still, with investors tuned into current oil and gas market developments and turning to underperforming sectors, Devon Energy fell back below $70. Crude oil futures fell below $80 last week on a weakened demand outlook linked to recession fears and Covid outbreaks in China.
But with oil volatility the norm since the start of the pandemic, prices could rebound quickly. Europe’s plan to ban imports of Russian crude from next month and OPEC’s aim to limit supplies could make $100 oil a reality this winter.
That would be good news for a low-cost producer like Devon Energy, which can make a profit on oil prices above $30. With a forward price-to-earnings ratio of 7.8x matching its 7.8% yield, the stars are aligned for the upside.
Has Verizon Communications stock bottomed out?
Verizon Communications Inc. (NYSE:VZ) is down 26% since the start of the year. Intense promotional activity aimed at luring wireless customers away from competitors weighed on earnings. At the same time, a weak economic outlook could hurt earnings through 2023. The Street expects EPS to decline year-over-year in each of the next four quarters.
So why invest here? At this point, macro headwinds appear to be priced into Verizon stocks. And after better than expected third quarter results, the bottom is near if not reached. Improving subscriber statistics and the benefits of the Tracfone takeover have been beating up and down. Since the Oct. 21 report, the stock is down $4 from its low.
Technical analysis also shows that Verizon is oversold. A view of 10,000 feet provided by the monthly chart reveals that the price is well outside the lower Bollinger Band. Historically, uptrends have followed these extreme lows.
Verizon’s recovery will likely be slow and prolonged as the market weighs the impact of a potential recession on consumer and business wireless demand. But with a dividend yield of 6.8% that’s comfortably higher than rival AT&T, it’s an easy call to buy and hold.
What will motivate the return of Simon Property Group?
Simon Real Estate Group (NYSE: SPG) offers one of the highest forward yields in the S&P 500 at 6.1%. It has increased its dividend in each of the past two years after the pandemic fell.
After soaring 87% in 2021, the high-end mall and outlet REIT is offering a 25% discount this Black Friday. The Fed’s rate hike campaign has had a dual effect on society.
First, higher rates mean higher borrowing costs, which limits Simon Property Group’s ability to purchase or develop commercial properties. And since investors expect a certain level of growth for the risk they’re taking, anything that limits growth is a concern, especially when you’re carrying over $30 billion in debt.
Second, higher interest rates hurt consumers’ ability to save and have a negative impact on discretionary spending. Malls in tourist towns could be hit hard by a prolonged recession.
Yes, Simon Property Group’s dividend is compromised by its weakened balance sheet and macroeconomic outlook. But there are reasons to believe the payouts are sustainable and a rebound is inevitable.
Management is taking steps to improve its finances and weather the storm for better days. The company ended the third quarter with $8.6 billion in cash and comfortable coverage ratios.
Additionally, as economic conditions improve, Simon Property will have more than bricks and mortar to drive growth. US investment in e-commerce and its expansion into Japan and South Korea should improve revenue and diversification. In the meantime, a rising dividend trend should continue to attract Black Friday income buyers.