Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

3 Stocks You Should Own When the Fed Cuts Rates Next Week

Companies / Investing 2019 Jul 27, 2019 - 12:53 PM GMT

By: Robert_Ross

Companies

Looks like an interest rate cut could come as early as next week.

Federal Reserve Chair Jerome Powell hinted at lower rates earlier this month.

Now investors are pricing in a 100% probability that the Fed will lower interest rates when it meets next week, according to global brokerage company CME Group.

This would be the first rate cut since December 2008, when the Fed cut rates to effectively zero and kept them there for seven years.

The Fed started raising rates in late 2015. Then it pumped the brakes after the stock market fell 20% at the end of 2018.


Now it’s probably going to lower rates again.

This is good news for US stocks. And healthcare stocks in particular…

Interest Rate Cuts Boost Healthcare Stocks

As you might know, the Federal Reserve lowers interest rates when it’s worried about the economy.

A lot of the worry here stems from weak manufacturing, housing, and jobs numbers that have come in recently. In these cases, the Fed often lowers rates to try to boost economic activity.

In any case, lower rates are good for stocks across the board. The last six times the Fed cut interest rates during an economic expansion, the S&P 500 gained almost 10% on average over the following three months.

Healthcare stocks did even better. They outperformed the S&P 500 by an average of 7% in the nine months after a rate cut, according to Barclays.

Even when the S&P 500 pulled back 20% from October to December last year, healthcare stocks only fell about half as much. You can see this in the next chart.



There’s good reason for this. Investors buy healthcare stocks during periods of economic uncertainty because the healthcare industry is remarkably consistent.

For the most part, people spend money on healthcare no matter what. That means healthcare companies enjoy stable revenues. And their stocks can pay reliable dividends.

Nothing Stops People from Buying Tylenol

America’s aging population is a part of the reason healthcare is such a safe bet.

It’s simple: 10,000 Baby Boomers are retiring every day. These people are getting older. And that means they need more medical care.

This translates into very consistent spending on healthcare. In fact, the Centers for Medicare and Medicaid Services (CMS) says US healthcare spending will grow 5.5% annually through 2027.



There isn’t much that could stop that growth.

Think about it… the weak manufacturing numbers I mentioned earlier won’t stop anyone from buying Tylenol, or arthritis cream, or diabetes medication.

This kind of reliable spending is why investors buy healthcare stocks when the economy is weakening. People pay for healthcare—period. That means healthcare companies earn stable profits no matter what.

So investors buy in, and stock prices go up.

On top of that, healthcare stocks often pay safe and reliable dividends…

My Top Healthcare Dividend-Paying Stocks

Regular readers know I’m always hunting for the safest and most reliable dividend-paying stocks. And healthcare stocks fit the bill.

See, the predictable growth in healthcare spending means healthcare companies can pay consistent dividends. Plus, many of these companies have long histories of increasing their dividend payouts.

Take Johnson & Johnson (JNJ), for instance—one of my top healthcare dividend-paying stocks.

Johnson & Johnson is the largest health company in the world. It sells everything from knee replacements to Tylenol, Band-Aids, and baby shampoo.

Johnson & Johnson pays a 2.9% dividend yield. That’s respectable. But the really impressive part: It’s increased its dividend payout for 47 years in a row. Only 19 companies can top that.

And, with a low payout ratio of 66%, it’s very safe. (Remember, a company’s payout ratio is the percentage of profits it pays as dividends. A lower ratio points to a safer dividend.)

Next on my list is AbbVie Inc. (ABBV). The company is one of the largest suppliers of immunology and cancer drugs in the world.

AbbVie pays a large 6.3% dividend yield. With a three-year average payout ratio of 79%, the company should have no trouble servicing the dividend.

Finally, we have Abbott Laboratories (ABT). The company sells medical devices, nutritional, and diagnostic products. Think pacemakers, catheters, and infant formula.

Abbott’s 1.5% dividend yield is small. But the company has increased its dividend for 45 years in a row. With a payout ratio of 79%, it’s almost guaranteed to increase the payout again in 2019.

As Close as It Gets to “Free Money”

While the dividend yields on these three companies are relatively low, their dividends are all safe and reliable.

Buying companies like these and holding them is the key to dividend investing. As I’ve mentioned before, when you reinvest your dividends, you can more than double your returns over the long run—without doing much of anything.

For instance, if you bought $10,000 worth of Johnson & Johnson (JNJ) stock in July 1999 and reinvested all of your dividends, your position would be worth $46,581 today.

But if you didn’t reinvest your dividends, that same $10,000 would only be worth $21,867. That’s a big difference.

Reinvesting your dividends takes advantage of the power of compound interest. Frankly, it’s as close as you get to “free money.”

So don’t overlook it.

The Sin Stock Anomaly: Collect Big, Safe Profits with These 3 Hated Stocks

My brand-new special report tells you everything about profiting from “sin stocks” (gambling, tobacco, and alcohol). These stocks are much safer and do twice as well as other stocks simply because most investors try to avoid them. Claim your free copy.

Until next time,

By Robert Ross

© 2019 Copyright Robert Ross. - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in