BofA Securities Warns of 5% to 10% Sell-Off: 5 Safe Dividend Stocks to Buy Now

Investing

Published: February 12, 2021 7:57 am

Market veterans have seen this movie before: unfounded market optimism that lacks a real foundation of fundamental valuation but instead rests on psychological factors. Former Fed Chair Alan Greenspan popularized the term “irrational exuberance” in a 1996 speech addressing the burgeoning internet bubble in the stock market. While he was early on the call, the market blew up a few years later and some serious losses were taken.
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While the situation is different today, there are many signs that a correction is coming. That includes the massive amount of retail investor stock and option trading. In fact, retail trading now accounts for a stunning 20% of daily market volume. In addition, 20% of total option volume now comes from orders of 10 contracts or fewer. BofA Securities has noted these current conditions and said this when comparing now to 2000:

We expect a 5-10% market correction in the first quarter as the market “unknowns” above coincide with rising market exuberance, which would present a good buying opportunity in a broader bull market. We have already eclipsed the prior record in equity issuance from the dot-com bubble and we note that after the last two peaks, S&P 500 PE multiples dropped. For the past two years, the number of unprofitable IPOs has hovered near 80%. US investors have not been asked to buy this many new, unprofitable companies since the year 2000.

Again a 5% 10% correction is not the kind of drop we saw in 2000, or even last year. Yet, like last year, it could come very fast, so it makes sense to move to safer stocks that pay dividends. We found five that look like great places to park some portfolio money now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AT&T

This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.

While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.

AT&T reported fourth-quarter 2020 earnings that were shored up by an expanding subscriber base, but COVID-19 is still disrupting the company’s operations. The telecommunications and programming giant reported consolidated revenues of $45.7 billion and a net loss attributable to common stock of $13.9 billion, or −$1.95 per share. Adjusted earnings per share were $0.75 per share, including “asset impairments, an actuarial loss on benefit plans, merger-amortization costs and other items.”