There’s no doubt that 2023 has gotten off to a good start for stock investors. Since January 5, we’ve seen a sharp rally in the markets – the S&P 500 is up 5% in that time, and the NASDAQ index has gained a stronger 8%. While this doesn’t end the longer-term bearish market since early last year, it does bring some hope that this year may be better.
Or perhaps not. Economist Mohamed El-Erian has taken a downbeat look at the near-term prospects, noting that headwinds are in play which may bring additional pressure to the markets.
El-Erian doesn’t deny the recent positive turns that have bolstered sentiment, particularly the cooling down in the rate of inflation and the slowing down in the Federal Reserve’s aggressive interest rate hikes. But he also points out four strong headwinds: the potential for a new COVID outbreak in China; depleted household savings in the US; the likelihood that US inflation will remain ‘sticky’ at 4% or higher; and a Federal Reserve that may be reluctant to cut back on interest rates. Any one could present a stumbling block, and El-Erian sees the combination putting an end to the current rally.
A market environment like this practically screams out for investors to take defensive action – and that will naturally get them looking at dividend stocks. Reliable, high-yield div payers will provide a steady income stream, guaranteeing a return even when stock markets turn down.
With this in mind, we’ve used the TipRanks platform to pull up the details on two ‘dividend champs,’ that feature Strong Buy ratings from the analyst consensus, and yields of 8% or better to ensure the cash return. Let’s take a closer look.
Plains All American Pipeline (PAA)
First up is Plains All American Pipeline, a hydrocarbon midstream company. PAA operates in the area between drilling wellheads and customers, moving crude oil, petroleum products, natural gas, and natural gas liquids through a network of pipelines, storage tank farms, transport hubs and transfers, refineries, and terminals. The company’s assets also include more than 2,000 trucks and trailers and some 6,000 crude oil and natural gas liquid railcars. The company, which is based in Houston, Texas, can handle the movement of more than 6 million barrels per day of petroleum and natural gas liquids.
The business is just as big as it sounds, and in dollar terms, PAA saw top line revenues of $14.33 billion in its last reported quarter, 3Q22. This total was up 33% year-over-year, and reflected a combination of higher transport volumes and higher commodity prices. Getting down to the bottom line, the company had a net income of $384 million, a solid turnaround from the $60 million loss reported in the prior-year quarter.