The markets might be breathing a sigh of relief after the two-week U.S.-Iran ceasefire agreement, but that doesn’t mean it’s time to let our guards down, especially since things are off to a turbulent start following Israel’s attack on Lebanon. Undoubtedly, the more than 1,300-point gain enjoyed by the Dow Jones Industrial Average could easily be given back if the Strait of Hormuz stays closed and we don’t gain clarity into what happens next. With Iran reportedly looking into setting a “toll booth” for ships moving through, let’s just say that things are complicated in the early days of the ceasefire.
In any case, investors should be prepared to hang in there as geopolitical uncertainties stay on the high end. And given oil can jump several dollars in any given day, the days of $100 oil (or higher) might not be over with quite yet. Once the Strait finally does open for business again, another several dollars could be wiped off the oil price, but until then, investors might wish to consider battening down the hatches, especially if the Iran crisis has hit one’s portfolio extra hard.
So, what’s a good place to get paid dividends while experiencing less day-to-day market choppiness?
Verizon
Verizon (NYSE:VZ | VZ Price Prediction) looks like a tempting buy on the dip while the yield inches closer to 6% again. The telecom titan, which clocked in one of its best quarters in a while, is now in the process of rolling over. The stock is off more than 6% from its peak and might be at risk of a further plunge as investors look to rotate back into the risk-on plays again.
While the technical picture doesn’t look great, the beta, currently at 0.27, could make the stock a great safe haven from the geopolitical storm. As the telecom looks to follow up with another strong quarter while continuing to raise the bar on the dividend, I’d not look away from the play now that CEO Dan Schulman has seemingly found a way to turn the tide.
Verizon is saving big money this year, and as the firm garners subscriber momentum, it might find itself with more than enough extra cash to give back to investors (buybacks and dividend increases). Indeed, debt was a huge problem for Verizon, but given its new trajectory, I think the firm is well on its way to becoming a financially flexible cash cow again. Add the potential for an AI-driven smartphone supercycle into the equation, and it’s tough to pass on Verizon shares at just 11.8 times trailing price-to-earnings (P/E).
Exxon Mobil
Exxon Mobil (NYSE:XOM) shares got crushed, dipping over 4% on Wednesday as oil prices imploded below $100 per barrel. It seems like the big oil trade is done and over. But until the Strait of Hormuz situation is cleared up, there’s no telling where oil will finish the month. Either way, Exxon Mobil is positioned to win whichever direction oil heads next.
As investors rush out of the stock at the first signs of a reversing oil price, I’d look to pick up a few shares on the dip, not as a stability or safety play, but as a way to hedge against another spike in oil prices. The company also clocked in its latest first-quarter results, which didn’t soothe investor fears on a day that saw oil plunge below $95 per barrel. The 6% production drop may be a tad concerning to some, but it was really no surprise given the blockage in the Strait of Hormuz.
Of course, the 2.5% yield and longer-term narrative are still in play, but amid the war in Iran, it’s all about oil prices. And if you’re still up at night over the conflict in the Middle East and the potential for an oil shock, I’d argue that watching the big oil plays into weakness could be the move that helps investors better prepare their portfolio at a slight discount. Oil shocks happen every so often, and it’s the premier energy titans that tend to act as terrific portfolio diversifiers when all else fails.
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