2 High-Yield Stocks For The Next Phase Of The Market

It’s time to start looking toward a post-coronavirus market and economy. And these two high-yield stocks are well-positioned for the coming recovery.

It’s been a wild ride in the market. A 34% crash in record time involved a lot of indiscriminate selling—just about everything got crushed. Then, an epic 20%-plus rally from the lows lifted almost every stock. Now, we are entering a different phase.

From here on, stock performance is likely to be a lot more company-specific rather than mostly a consequence of the market whirlwind. The coronavirus and adjoining economic shutdown are affecting companies very differently.

Some companies are facing massive disruptions. Airlines and cruise lines, as well as many retailers and energy companies, are taking a huge financial hit. Some companies won’t survive this and many of the survivors will take a long time to overcome the impact. On the other hand, certain companies are barely affected by the shutdown, and others are actually thriving.

For example, business at Amazon (AMZN) is booming as people stuck at home have to shop online. Companies like AT&T (T) and Verizon (VZ) as well as Netflix (NFLX) are thriving as people use the internet and watch TV more while locked up in their homes. Healthcare companies and Utilities continue to do business as people still take their medicine and heat their homes.

Markets always look forward. The panic and uncertainty surrounding the track of the virus is quickly passing. The next market phase is likely to be all about the economic impact of the shutdown and the recovery. Companies that can endure and thrive through the rest of the crisis and recovery will own the near and intermediate terms. And the relative performance should reflect that fact.

High-yield stocks offer a nice buffer while we weather the rest of this storm. And I’ve found two companies that pay high and secure dividends and whose relative value in the market should soar in the months and quarters ahead.

2 High-Yield Stocks for a Post-Coronavirus Market

High-Yield Stock #1: Verizon Communications (VZ)

Yield 4.34%

Verizon in the largest U.S. wireless carrier. Of the four major U.S. telecom carriers (Verizon, AT&T, Sprint and T-Mobile), Verizon has by far the most wireless revenues with the largest network and coverage.

I like it better than the other large telecom providers because it is a near pure wireless play and competitors are distracted and tied up with mergers (the pending Sprint/T-Mobile merger and AT&T’s absorption of Time Warner). Verizon’s wireless business (which accounts for about 85% of adjusted earnings), along with its ancillary businesses in TV, internet and enterprise service, is booming during this crisis.

Wireless and internet usage is way up while people are stuck at home. It is one business that is absolutely thriving. Verizon should post very stable and probably better-than-expected earnings right through this economic disaster. The dividend should be secure and downside will be limited.

But it is also very well positioned for the post-coronavirus economy and market. Verizon is a leader in 5G and has already rolled it out in 30 cities, putting it ahead of everybody else and first to the party. 5G will be a game-changer that will thrust the country into a new technological age. 5G is also likely to be the biggest story in the market after this crisis abates.

Smartphones with 5G are just hitting the market this year, although things could be delayed. New technologies will need a much higher degree of internet connectivity and they will need Verizon, which will charge for the expanded services.

Verizon is a great stock to own through the crisis and it also has a strong growth catalyst for the post-coronavirus market.

High-Yield Stock #2: AbbVie Inc. (ABBV)

Yield 5.88%

AbbVie Inc. (ABBV) is a cutting-edge, U.S.-based biopharmaceutical company specializing in drugs and treatments that incorporate biotechnology as a solution to human diseases. Nothing has really changed just because the world around it is collapsing. People won’t stop taking their medicine. And healthcare will likely emerge as the hero of this crisis.

Everything this company had going for it (the pipeline, a big in-the-works merger, better-than-expected earnings, the safe and high dividend) is still intact, only the stock is a lot cheaper now. Few companies have such a defensive business combined with extremely powerful demographic headwinds from the aging of the population.

The company is facing competition for its number one selling blockbuster drug Humira overseas and will face competition in the U.S. starting in 2023. The stock got creamed as investors worried about replacing Humira revenues. But the company has a powerful pipeline and newly launched drugs that I believe are more than capable of replacing lost revenues. As well, the merger with Allergan (AGN), which should close in the next couple months, will further diversify the company.

Investors, as well as insiders, had realized ABBV’s value, and the stock soared over 60% in the months before the virus. ABBV was a good stock before the crisis and will be after the crisis. It is also one of the few stocks you can buy here with the remaining uncertainty.

 

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