Fast-growing dividend stocks
Stock markets have been enjoying a time of serenity. This serenity is likely to be short-lived, though, since inflation is on the rise.
As UBS pointed out, investors seeking a dependable, inflation-beating income should look to dividend climbers.
With these screening criteria, the investment bank examined publicly traded companies:
UBS estimates a three-year dividend growth rate of at least the high single digits.
A current dividend yield that is higher than that of the S&P 500, which is around 1.4 percent.
Payout ratios that can be sustained
UBS analysts rate the stock as a buy.
Price targets at UBS could rise by more than 10%.
The strategists noted that their criteria did not include the highest outright dividend yield, but rather rapid and sustainable dividend growth.
According to UBS, gold miner Barrick Gold will pay a 3.7 percent dividend yield in 2021, with the stock expected to rise 13 percent in the next year. Warren Buffett’s Berkshire Hathaway recently held Barrick Gold for a short period of time as a hedge against a frothy market and an inflation hedge at the time.
According to UBS, the two health-care names on the list are Merck & Co. and CVS Health, while NextEra Energy and Sempra Energy are fast dividend growers in the energy sector.
Other stocks with high dividend growth include Air Products and Chemicals, PPG Industrials, UPS and American Electric Power.
Goldman best stocks as inflation picks up
For equities investors who are enjoying the market’s historic rise this year, inflation has become a serious danger.
Goldman Sachs identified several stocks that would not be hurt by price inflation.
To find highly profitable companies, the bank studied the relative level and unpredictability of each stock’s gross profit margins in relation to the industry average. Despite greater pricing pressures, all these firms are likely to enjoy top and consistent sales growth this year.
The list is as follows:
“Inflationary pressures may prevent some firms from increasing margins, while firms with pricing power will benefit,” Kostin said.
Etsy, Capri Holdings, Philip Morris, and Colgate-Palmolive were among the consumer stocks on the list.
These stocks may be a good place to hide because they are less affected by rising costs. They also appear more appealing now than a year ago, as they underperformed the market in 2020, according to Goldman.
“Firms with high pricing power have lagged sharply over the last year, and the huge valuation premium previously accorded to these stocks has vanished,” Kostin said.
Activision Blizzard, Williams Companies, IHS Markit, Aspen Technology, and Adobe are some other companies with strong pricing power.
Coinbase has won bitcoin exchange Coinbase a top 10 ranking in the flagship ETF portfolio manager’s top 10 ETFs.
Coinbase shares have fallen nearly 10% this week as the price of bitcoin has plummeted. According to Coin Metrics, the digital asset lost 30% of its value on Tuesday but has since recovered to $40,776 per unit.
Coinbase, which was founded in 2012 to simplify the purchase of bitcoin, entered the public markets with a direct listing last month. However, it is down more than 45 percent from its peak, and shares have dropped more than 21 percent in May as the price of bitcoin has fallen.
Wood is accustomed to buying weakness in beaten-down growth stocks. Any selling pressure in her strongest conviction picks usually results in millions of shares being purchased. Despite $1 billion in outflows from her fund in the last month, the investor is sticking with her strategy, according to FactSet.
In March, Wood told analysts that Ark is “becoming increasingly optimistic about our portfolios in this sell-off.”
“We are getting great opportunities” to buy pure play names in the funds during the sell-off, according to Wood. “When we have opportunities like this to invest in pure plays rather than more mature plays, we will return to pure plays.”
Wood, a long-time supporter of bitcoin, told Bloomberg TV on Wednesday that she still believes the digital asset will reach $500,000. She did, however, say that a drop in bitcoin’s price could help the prospects for an Ark bitcoin ETF.
Coinbase’s stock dropped nearly 3% on Friday.
According to Bloomberg, Wood is unconcerned about the current period of consolidation in innovation stocks.
“If our research is correct, no promises,” Wood said on Bloomberg TV, “we believe our portfolios will more than triple over the next five years, which is more than a 25% annual rate of return.” “These innovation platforms have reached breakneck speed. There will be no going back.”
The Ark Innovation ETF is down more than 33% from its high and nearly 15% year to date.
Innovation stocks and bitcoin
Raw materials, agricultural products, and key industrial inputs have all increased in price this year as the global economy recovers from the pandemic. However, some of that euphoria appears to have worn off, with lumber and corn futures prices plummeting sharply.
Wood believes that, in addition to the expected drop in commodity prices, deflation from innovation will reverberate throughout the economy. According to Wood, costs are dropping dramatically as new technology alters the world order.
“This deflationary force will gain traction, and we have deflation associated with each of the five major platforms, DNA sequencing, robotics, energy storage, artificial intelligence, and blockchain technology,” Wood predicted.
“I believe that any company that is on the right side of these five platforms will enjoy exponential growth opportunities like we have never seen before, with the exception of perhaps Amazon being the poster child over the last 2025 years,” Wood said.
Ark Invest’s flagship fund, Ark Innovation, is down more than 10% this year due to a shift into value stocks. Wood has been purchasing distressed, high-conviction picks, claiming that it is healthy for the bull market to expand into other sectors.
Furthermore, Wood stated that higher tax rates appear to be stuck in a rut, which is good for innovation stocks.
Wood, a long-time bitcoin supporter, believes the world’s largest cryptocurrency has a place in the world of deflation.
Emerging markets, where currencies are closely linked to commodity price cyclicality, could eventually drive bitcoin outperformance.
“I believe that as their currencies deteriorate, the velocity of their money will increase as more and more of their populations shift into bitcoin and other cryptocurrencies and assets,” Wood predicted.
The well-known fund manager predicted that some of these emerging market central banks would begin to accumulate bitcoin and other digital currencies.
This week, Bitcoin has continued its comeback, boosting risk sentiment in financial markets. According to Coin Metrics, Bitcoin ended the day at around $38,500. Following a 30% intraday drop on May 19, the cryptocurrency reached a low of $30,001.51.