As October begins, many investors find themselves navigating a turbulent market; however, recent analyses indicate that this month heralds a lucrative season for select dividend-paying stocks. The emphasis on dividend-paying equities as a reliable investment option is particularly meritorious during this time as they demonstrate consistent historical returns and potentially benefit from favorable macroeconomic trends.
Understanding Seasonality in Stocks
The phenomenon of seasonality in stock market performance should not be underestimated. According to Bespoke Investment Group, entering October marks a period traditionally characterized by strong returns, particularly over three-month periods. This period is often highlighted as being one of the strongest in the investment calendar for short-term gains, making it a prime time for investors to reassess their portfolios. Dividend stocks, which tend to be more stable than their non-dividend counterparts, have witnessed impressive fourth-quarter performances, averaging gains of over 11.5% over the past decade.
This trend suggests that now might be the opportune moment to evaluate dividend-paying stocks, as they not only have historical seasonal advantage but also present enticing prospects in light of the current economic landscape. When interest rates from the federal reserve are lowered, dividend yields on these stocks become increasingly attractive against Treasuries, drawing in income-seeking investors.
The Standouts of 2024
Among the stocks highlighted by Bespoke, Tapestry has emerged as a significant player. Known for its popular brand Coach, Tapestry’s performance in previous fourth quarters has exceeded 17% gains on average over the decade. The overarching year-to-date total return of approximately 28.3% in 2024 showcases the strength of its investment appeal. Notably, Tapestry’s current dividend yield stands at a commendable 3%, further solidifying its attractiveness.
Analysts such as Matthew Boss from JPMorgan have recognized Tapestry as an “overweight opportunity,” highlighting its growth potential fueled by innovative product lines. With consumer trends increasingly favoring nostalgic designs like those of Coach’s Tabby handbag, Tapestry represents an excellent blend of both consumer appeal and financial viability.
Another intriguing dividend stock worthy of investors’ attention is KeyCorp. Historically, KeyCorp has averaged nearly a 15% increase in share value during the fourth quarter over the last ten years. With a total return exceeding 21% thus far in 2024, alongside a nearly 5% dividend yield, KeyCorp stands as a robust investment. Analyst R. Scott Siefers from Piper Sandler has also voiced his optimism surrounding KeyCorp, recently raising the 12-month price target for the stock.
However, while there may be expectations for net interest income to rise, Siefers adjusted his earnings projections slightly downwards, indicating a cautious approach as they navigate forecasted expenses and fee structures. Such insights could serve as both warnings and opportunities for investors venturing into this stock.
Lastly, the investment giant BlackRock has demonstrated resilience, averaging nearly a 14% advance in the fourth quarter across a decade, with a current dividend yield of 2.2% and an impressive total return of about 18% in 2024. Wells Fargo analysts have recognized BlackRock as an industry leader, praising its robust fund flows and margin stability. Moreover, the anticipated shifts in fixed-income flows as the Federal Reserve lowers interest rates could further benefit BlackRock, positioning it favorably as investors seek security in longer-duration assets.
As October unfolds, dividend stocks present a significant opportunity for investors looking to bolster their portfolios. With Tapestry, KeyCorp, and BlackRock leading the charge, these companies not only have solid historical performances but also promising fundamentals that may guide their future successes. Understanding market dynamics, making informed predictions, and choosing the right timing are essential to capitalizing on the potential gains that this month can deliver. Investors should stay informed, take note of analysts’ insights, and most importantly, selectively position themselves for optimal fourth-quarter results.