Recessionary fears and the U.S. Federal Reserve’s latest rate hike point to continued strength in dividend stocks…
Since the start of 2022, the S&P 500 has tumbled by 13.9%. Other key indexes like the Dow Jones and Nasdaq Composite have plummeted by 10.2% and 21.7% as well.
This is largely due to the crisis in Ukraine. The Federal Open Market Committee said the war and sanctions placed on Russia have drastically impacted the availability of key commodities worldwide.
In turn, global uncertainty continues to pressure a variety of European markets and prices within the U.S. – pushing the Fed to pursue yet another 0.75% interest-rate increase.
Meanwhile, the central bank also boosted the federal-funds target from a range of 1.50% to 1.75% to a higher range of 2.25% to 2.50%.
These figures have further bolstered concerns within Wall Street – with 53% of traders forecasting another 0.75% hike in September.
On the flip side, these actions – and expectations that rates will remain elevated through 2024 – have continued to support some aspects of the stock market.
In fact, dividend-yielding investments remain incredibly popular among those seeking haven from present volatility… including stocks like Northrop Grumman (NOC).
That’s because Northrop is a defensive play on two fronts.
The company offers investors a dividend yield of 1.44%. It’s also one of the biggest defense contractors in the world, with a market capitalization of $75.5 billion.
It develops and sells modern military equipment to the U.S. government and its allies – including diversified technologies for the burgeoning air, cyber, land, sea, and space industries.
Among these technologies are protected satellite communications, in-orbit robotic assembly, and missile-defense systems. They also consist of state-of-the-art propulsion systems, navigational tools, and directed-energy lasers.
This suggests it has a wide array of products that will benefit its business regardless of how geopolitical tensions ebb and flow, as it regularly receives billions of dollars for military electronics, cybersecurity, and unmanned aerial vehicles.
And with tensions between NATO, Russia, and China on the rise, experts anticipate orders and backlogs will remain strong across the defense sector – boosting the profits and margins of big names such as Northrop in the process.
Meet the Press Ambassador Nikki Haley recently said:
“When tyrants speak we should listen.
Putin said he was gonna take Ukraine and he is.
China said they were gonna take Hong Kong and they did.
China says they're going to take Taiwan next – we should be ready for that.”