Buy these two dividend stocks that will continue to pay their shareholders a safe and growing income stream no matter who ends up taking the White House. While everybody figures out how to prepare their portfolios for our next President, you can rest easy owning these dividend growth stocks built to last a lifetime.
We have noticed that the upcoming election has many investors sitting on their hands, waiting for the results before they make any new moves in the stock market. The proposed economic policies of the two candidates are starkly different, making it difficult to predict what will happen after the election.
A recent report from investment management firm, BlackRock, discusses past market returns under both Republican and Democratic administrations. It also gives an opinion on what may happen going forward if either Clinton or Trump wins the election. Use this information now to get a jump on how stocks will perform for the next four to eight years.
To start, consider this quote from the report: “Historically, whether a Republican or Democrat occupies the White House has had no statistically significant impact on U.S. equity markets.” With all of the news coverage and endless political advertisements, it is easy to form the opinion that things will be different after the election, based on who wins the Presidential race.
However, history shows us that who wins does not make a dramatic difference in stock market returns going forward. There is one useful point concerning the four-year political cycle. According to the report, the evidence shows that the first year of a new term will have the worst stock market results and the third year of a President’s term is the one with the best historical stock market returns. That’s good to know, but you won’t make much money if you stay out of the market until 2019.
The report gives its expectations on what will happen for either party winning the White House. The report writers are confident that whoever becomes President must tackle the issue of corporate income tax rates. With Japan recently lowering its corporate rate, the U.S. now has the highest tax rate on business profits in the developed world.
Along with a corporate tax rate change, there is an expectation that some sort of tax break will be given for corporate profits that are stuck offshore to avoid double taxation to be brought into the U.S. at a low tax rate.
Health care costs are another subject that whoever is President will most likely have to do something about. The U.S. spends over twice as much on health care per person than the developed country average. Clinton plans to use price controls to manage the costs, while Trump would likely go for a free market approach.
The primary issue facing Clinton if she becomes President will be the continuation of a sharply divided government. Even Trump may have problems to take a middle road approach to governing. This chart shows how the two parties have become more polarized over the last two decades.
The report says it does not expect either Presidential candidate, if he or she wins, to be able to do anything about the growing of entitlement costs. Entitlement spending growth is the biggest issue facing the federal budget, and if nothing gets done in the next four or eight years, we can expect an economy that looks a lot like the last eight years.
The bottom line is that it is unlikely that either candidate will, if elected, be able to make big changes in government tax and regulatory policy that will be meaningfully good or bad for business. This means we can expect an economy that will continue to muddle along at about 2% annual GDP growth and a stock market that is volatile but ends up producing annual returns that are within 5% of normal levels each year.
In that type of environment, an investment strategy that focuses on attractive current dividend yields with good potential for growth will outperform the overall market and generate acceptable total returns for your portfolio. There is no reason to wait for the election results. Beat the crowd and get started now to build a quality income stock portfolio. To help get you started, here are a couple of ideas.
Easterly Government Properties Inc. (NYSE: DEA) is a two-year old REIT that acquires and own properties that are leased to federal government agencies. The government may be the biggest growth industry in the country and Easterly has the contacts and expertise to capitalize with its own growth. DEA currently yields 5.0% and I forecast 5% to 8% annual dividend growth.
Governmental over-regulation of the banking industry makes it easier for non-bank entities to take away profitable business from the large commercial banks. Commercial mortgage lenders like Blackstone Mortgage Trust Inc. (NYSE: BXMT) have numerous competitive advantages over the commercial banks, and new pending bank regulations will only enhance those advantages. BXMT currently yields 8.9% and the company’s profits will improve if the Fed raises interest rates.
Companies like DEA and BXMT that won’t cut their dividends, pay a high current yield, and have the potential for dividend growth is an integral part of the income strategy for my newsletter, The Dividend Hunter. Blackstone and Easterly are both strong, stable dividend payers just like the 20 other high-yield stocks currently available through my Monthly Dividend Paycheck Calendar.