In a logical world, one would think, with the Federal Reserve raising interest rates all year long, that rates across the entire Treasury yield curve would head higher. In fact, just the opposite has occurred. Since the beginning of October, the yield on the benchmark 10-year note has dropped from 4.23% to 3.69%. During the same period, the 30-year long bond’s yield plummeted from 4.38% to 3.86%. In fact, with federal funds now at 3.75% to 4.00%, the 10-year and 30-year Treasury securities are trading at or below that rate.
Why is this happening? The reasons are numerous, but the biggest one is that the bond market senses that a recession, if not here now (despite the empirical data that says it is), certainly is on the way, and it could be very ugly. So what are income investors to do? Look for quality stocks that can survive in a turbulent market and that pay big dividends.
We screened our 24/7 Wall St. research database for quality blue-chip stocks offering solid upside potential and dependable dividends. All are rated Buy across Wall Street as well. It is important to remember though that no single analyst report should be used as a sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business. In December 2018 it acquired 35% of Juul Labs, but the stock was pounded last summer when the FDA announced a ban on all sales of Juul vape pens.
In October, the company, which at the height of its popularity dominated the market with its sweet flavors, agreed to pay $438.5 million in a settlement with 33 states and one territory over marketing its Juul product to teens. Altria announced recently that it is looking to end its noncompete agreement with Juul to compete more aggressively in the vape space on its own.
While this finally gets sorted out, it is a good bet that investors still will receive the 8.61% dividend. Stifel has a $50 target price on Altria stock. The consensus target is $48.73, and shares closed on Wednesday at $43.58.
AT&T
The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.
Its Communications segment offers wireless voice and data communications services and sells handsets, wireless data cards, wireless computing devices with carrying cases and hands-free devices through its own company-owned stores, agents and third-party retail stores.
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