BARCLAYS: Buy these 30 'cheapened' stocks with high incomes that can beat macro headwinds or rising rates

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  • As the economy recovers, dividends are likely to restart.
  • For investors looking for income, high-yielding stocks offer a cheap and attractive option.
  • These are these the 30 high-dividend stocks Barclays are betting on right now.
  • See more stories on Insider’s business page.

After a tough year, dividend investing is coming back in vogue, as investors look to their stock positions for income, especially right now, as interest rates are so low and returns can often be small.

During the coronavirus pandemic, many companies were forced to cut their payouts to shareholders, especially those that are typically higher yielding – like banks – which crippled the value of their shares.

But, with economic recovery on the cards and fixed-income assets like government bonds looking less attractive, some of those beaten-down stocks with high dividends – nicknamed “yield stocks” – are well placed to benefit.

“We currently OW [overweight] yield as its valuation and high yield look attractive, even if we don’t expect it to be a key beneficiary of growth rebound in 2H,” Barclays strategists, including Emmanuel Cau, wrote in a note published on Wednesday.

“Its cheapness stems somewhat from the market looking expensive rather than yield looking particularly cheap, which could reverse as the market normalizes in the coming 6-12 months,” they added.

With share buybacks and a return to dividend payouts on the cards, as the financial and regulatory pressures on company balance sheets ease, investors are getting bullish on high-yielding stocks.

High-dividend stocks tend to exhibit some qualities similar to so-called value stocks, which are closely linked to the performance of the economy, because they often trade at slightly cheaper price-to-earnings ratios. They tend to be undervalued because their stock price trades lower relative to the company’s fundamentals.

“Yield typically trades in line, or slightly lower, than the market on P/E, although is currently trading at its cheapest ever multiple relative given how expensive the market has become,” the note added.

However, historically, yield stocks have not had a consistent relationship with the economic cycle, which could offer an attractive opportunity for those investors with an income tilt.

“It shows little correlation to other asset classes or macro environment, although some correlation to financials in equity markets, perhaps because they are higher yielders,” the note said.

With macro trends like inflation posing a threat to typical income assets like government bonds, yield stocks offer a cheap and attractive alternative.

These are the top 30 yield stocks that Barclays has handpicked:

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