We are nearing the end of the September quarter for the year and yet the Russian-war triggered market turbulence continues to impact the behavior and direction of the markets. Record high inflation across Europe, the UK, and the U.S. along with rising interest rate scenarios are hampering the overall market sentiments.
This week we looked at two sets of data; last week’s 52-week lows and dividend adjustments. We found a healthy correlation between last week’s sector performance and dividend adjustments since the start of the year.
1)52-Week Lows for the Week Ending September 2
TipRanks data found that in the week ending September 2, a whopping 35% of stocks from the financial sector reached their 52-week lows. On the other hand, a minor 2% of stocks in the utility sector reached their 52-week low. No other sector came so close to the lows witnessed by the financial sector. Remarkably, energy was the only sector to end the day on a positive note, up 1.81%.
This was a result of a mix of negative macro sentiments in the market. Notably, August U.S. payroll data showed an uptick in hiring, but at the same time, the unemployment rate reached 3.7%. This data along with August’s consumer price numbers expected in mid-September will decide whether the Federal Reserve may increase interest rates at the upcoming FOMC meeting.
Meanwhile, negative news from Gazprom, which is a state-controlled firm having a tab on Russian gas exports to Europe, said it would not be able to restart the pipeline on Saturday. This further dragged down the markets on Friday.
2)Dividend Adjustments
In a study of the dividend adjustments since the start of 2022, TipRanks data showed that 32% of utility companies that offer dividends have increased their dividend amounts, more than any other sector. This is not surprising since energy, and oil & gas companies have been one of the most favored sectors this year owing to their huge demand and record high oil prices.
For example, American Water Works (AWK) and Southern Co. (SO) both increased their dividends in the second quarter of 2022. Also, London-based BP Plc (BP) increased its dividend in August 2022.
At the other end of the scale, 20% of financial and basic materials companies have reduced their dividend amounts. The most affected sector this year has been the financial sector, obviously because of the rising interest rate and inflation. Similarly, the basic materials sector has also witnessed a setback as the prices of materials have increased considerably and people have started reducing spending or withholding construction.
3)Bargain Dividend Stocks
Among last week’s losers were several companies that pay dividends. Investors can use this data to go bargain shopping for dividend stocks that are trading near their 52-week lows. Last week, 23.5% of financial companies that pay dividends were trading at close to their 52-week lows, while only 3% of utility stocks were in the same situation.
Cadence Bank (NYSE:CADE), a regional premier bank, is hovering near its 52-week low of $22.04 hit in July 2022. The stock ended the last week down nearly 2.7%. Cadence Bank pays a regular quarterly cash dividend of $0.22 per share, representing a yield of 3.4%. The dividend is to be paid on October 3, with an ex-dividend date of September 14.
Similar to Cadence Bank, a few other financial companies that have been hovering near their lows in the last week and have their ex-dividend date coming up are Synovus Financial Corp. (SNV), Valley National Bancorp (VLY), and The Hanover Insurance Group (THG).
On the other hand, Chesapeake Utilities (NYSE:CPK), which engages in the distribution and transmission of natural gas, propane, and electricity, as well as the generation of electricity and steam may be a good stock to buy near its lows. Last week, the stock was down 2.8% and is still hovering near $126, although a bit higher than its yearly low of $117.43, witnessed in July 2022.
Chesapeake also pays a regular quarterly cash dividend of $0.54 per share, representing a yield of 1.56%. The dividend is to be paid on October 5, with an ex-dividend date of September 14.
Similarly, Global Water Resources (GWRS), which is hovering near its lows of $12.54, also boasts an attractive current dividend yield of 2.16% and has an ex-dividend date of September 15.
4)What are Analysts’ Views on these Sectors?
TipRanks data shows that since the start of the year, analysts have decreased their price targets for 53% of financial sector stocks and increased them for 37% of them.
At the same time, analysts have increased their price targets for 66% of utility stocks and decreased their price targets for 23% of them.
Ending Thoughts
Looking at the above data, it is clear that the utility sector remains the winner for this year. On the other hand, the financial sector remains in a weak spot. Investors can use this data, along with a host of other useful TipRanks tools, to select the best-performing stocks and earn a reasonable return on their investments.
