September is often a challenging month for stocks, but Morgan Stanley's analysis highlights the potential benefits of adding dividend-paying stocks to investment portfolios.
The S&P 500 has seen a modest increase of 0.4% in the early days of September, despite market fluctuations driven by rising Treasury yields and oil prices, as well as speculation about upcoming interest rate hikes by the Federal Reserve.
Todd Castagno, a strategist at Morgan Stanley, emphasized that dividends can provide a reliable income stream and help stabilize portfolios during uncertain times. The firm screened the Russell 1000 for companies that have raised their dividends by at least 15% over the past year, identifying several noteworthy stocks.
East West Bancorp, for instance, raised its quarterly dividend by 20 cents to 80 cents per share and has seen its stock rise 16% this year, with a current dividend yield of 2.4%. The bank's second-quarter earnings exceeded analyst expectations, and its forecast for net interest income growth has been upgraded.
Packaging Corporation of America also stands out, having increased its quarterly dividend by 20% in May, resulting in a current yield of 2.5% and a 15% stock price increase this year. Devon Energy, highlighted as a favorite by Morgan Stanley, has a dividend yield of 2.3% and has appreciated 31% year-to-date, with a recent 33% increase in its dividend per share.
The majority of analysts covering these companies rate them as buys, indicating strong potential for further price appreciation