The year-end rally in stocks was boosted by expectations that President-elect Donald Trump’s policies will propel growth and inflation. Possible tax cuts, deregulations and large fiscal stimulus also buoyed optimism in the markets. However, of late, there have been indications of harsher trade policies from the Trump camp, which might eventually jeopardize the bullish sentiment.

This year has been the most volatile in the recent past, with a historic election not only in the U.S. but also in Britain and Italy. The oil market, in the meantime, is gearing up to brace a maelstrom in 2017. Needless to say, Trump’s market-friendly policies is turning the broader market into one giant bubble, raising possibilities of disenchantment for investors in the near term. Given such widespread uncertainty, investing in dividend paying companies seems practical as they provide steady earnings regardless of the state of the global equity market.

Trade Policy May Hit Stocks

By naming China hawk Peter Navarro as head of a newly formed White House National Trade Council, the Trump administration has clearly indicated that the plan of imposing tax on imports is on track. Navarro along with Trump’s pick for commerce secretary, Wilbur Ross favor border adjustment tax that is also included in House Speaker Paul Ryan’s “Better Way” tax-reform blueprint.

If such a tax gets implemented, economists at Deutsche Bank AG (DB - Free Report) estimate that inflation will cross the Fed’s desired target level of 2% and push the dollar up by about 15%. This in turn will result in negative earnings revision for the S&P 500 and will be a deterrent to economic growth.  A stronger dollar hammers profits at U.S. multinationals as prices of goods and services escalate.

Intensely Tense Situation for Global & Oil Markets

From a geopolitical perspective, election of Trump as U.S. president has intensified anxieties, with the outspoken, real-estate mogul planning to “greatly strengthen and expand” the country’s nuclear capabilities, raising the possibility of a Cold War-era style arms race. His tweets on potentially massive changes to U.S. policy on China also raise uncertainty for the economy. Apart from the possible Trump move, economic growth in China also remains uncertain.

The impact of the fallout of U.K from the European Union (EU), historic election in Italy and other populist movements in Europe on the broader markets is also unknown. There is possibility of a ‘Nexit’ – Netherlands leaving the Eurozone as well. Opting out of the EU will benefit the Dutch in a number of ways including relaxed regulations and reduced spending on immigrants.

Volatility, in the meantime, is all but certain for the oil industry next year. When it comes to the oil market, uncertainty persists along all fronts including politics, supply disruptions, OPEC and non-OPEC quota compliance and U.S. shale oil production levels.

Valuation Risk

Trump’s market-friendly policies helped major indices scale to record highs. Since the Election Day, the S&P 500 rose 5.7%, while the Dow continued to hover near its psychologically important 20,000 level. Some sectors, such as banks, have shot up nearly 25% in the post-election run. However, this has made stocks substantially pricier from a valuation perspective.

The S&P 500’s forward price-to-earnings ratio climbed to 17.6 multiples from 16.6 multiples on Nov 8, according to Thomson Reuters data. When it comes to small-cap stocks, the Russell 2000 Index surged to 26 from 22 in the same period. This warns us that the markets might be approaching the overbought region which will either be corrected by going sideways or lower. 

Why Buy Dividend Payers? 5 Solid Choices

Thanks to the aforementioned factors, next year is certainly cast into uncertainty. This calls for investing in dividend paying stocks which boast immense financial strength and are immune to market vagaries. Such stocks reflect solid financial structure, healthy underlying fundamentals and better quality business. They have also raked in excellent risk-adjusted returns this year.

Hence, we have selected five such dividend paying stocks to boost your returns. Such stocks also possess a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. (BBY - Free Report) operates as a retailer of technology products, services, and solutions in the U.S., Canada, and Mexico. The company has a dividend yield of 2.5%, compared with the industry average of 0.75%. Its five-year average dividend yield is pegged at 6.94%.

Innophos Holdings, Inc. (IPHS - Free Report) produces performance-critical and nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care, and industrial end-markets. It has a dividend yield of 3.57%, compared with the industry average of 1.34%. Its five-year average dividend yield is 16.31%.

Macquarie Infrastructure Corporation (MIC - Free Report) owns, operates, and invests in infrastructure businesses that provide services to businesses, government agencies, and individuals primarily in the U.S. It has a dividend yield of 6.23%, compared with the industry average of 1.23%. Its five-year average dividend yield is 40.1%.

CM Finance Inc. (CMFN - Free Report) is an externally managed, non-diversified closed-end management investment company. It has a dividend yield of 15.04%, compared with the industry average of 9.22%. Its five-year average dividend yield is 68.8%.

Transmontaigne Partners L.P. (TLP - Free Report) provides integrated terminaling, storage, transportation, and related services. The company has a dividend yield of 6.42%, compared with the industry average of 4.37%. Its five-year average dividend yield is close to 2%.