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Stock futures were falling following three straight days of losses for Wall Street. Federal Reserve Chairman Jerome Powell again will be delivering testimony before Congress. His comments on Wednesday that the central bank likely would be raising rates further this year pushed markets lower.
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The numbers: Construction on new American homes jumped 21.7% in May, as homebuilders ramp up building single-family homes to meet strong demand from buyers.
Housing starts rose to a 1.63 million annual pace last month from 1.34 million in April, the government said Tuesday. That’s how many houses would be built over an entire year if construction took place at the same rate in every month as it did in May.
Economists were expecting a slight decline of about 0.8%. The numbers are seasonally adjusted.
This is the second month in a row that starts are up. The pace of construction was the highest since last April, when starts hit a 1.8 million pace.
The surge in construction this spring was led by the Midwest.
Both single and multi-family construction rose in May. Keen interest from would-be home buyers is creating strong demand for new homes. These buyers continue to face a lack of options in the resale market.
Building permits, a sign of future construction, rose 5.2% to a 1.49 million rate.
Key details: As the weather warms up, construction pace has picked up considerably.
The construction pace of single-family homes rose 18.5% in May while apartment building rose 28.1%.
Home builders were most active in the Midwest, where housing starts rose by 67% from the previous month. The Midwest also led the nation in terms of single-family construction.
Permits for single-family homes rose 5.2% in May while permits in buildings with at five units or more rose 7.8%.
Housing starts are up on an annual basis for the first time in nearly a year. The annual rate of total housing starts rose 5.7% from last May.
Big picture: New construction is a bright spot in an otherwise despondent housing market. For the buyers who brave 6% mortgage rates, there are few options in the resale market, which continues to funnel demand for new homes.
In fact, demand is so strong that homebuilders are pulling back on sales incentives, such as price cuts, the National Association of Home Builders reported on Monday.
Builders also reported that they were feeling upbeat about the housing market for the first time in nearly a year.
What are they saying? “To say that we did not see this one coming would not even come close to capturing the degree to which the May residential construction data caught us off guard,” Richard Moody, senior vice president and chief economist at Regions Financial Corporation, wrote in a note.
“This is without question an exaggeration of the underlying reality and a reminder that the housing starts data are among the most volatile and random of the government’s major economic indicators,” Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, wrote in a note.
“Having said that,” he added, “the housing sector broadly appears to be healing remarkably fast after enduring a historic shock in affordability last year, when 30-year mortgage rates more than doubled.”
Market reaction: U.S. stocks
DJIA,
SPX,
were down in early trading on Tuesday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose above 3.7%.
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The numbers: For the first time in nearly a year, home builders are upbeat about the housing market outlook.
The shortage of previously-owned sales is helping to buoy builders’ confidence.
With mortgage rates above 6%, many homeowners find little incentive to sell—nearly 92% have an outstanding mortgage with a rate below 6%, according to a recent survey conducted by Redfin
RDFN,
a brokerage and real estate listings company. And 23.5% of homeowners have a mortgage rate of less than 3%. Consequently, the number of new home listings has dropped by 22%, as compared with the same period a year ago, according to a Realtor.com housing trends report.
In turn, home builders are feeling good about their business. The National Association of Home Builders’ (NAHB) monthly confidence index rose 5 points to 55 in June, the trade group said Monday.
This is the sixth month in a row that sentiment has improved among builders. It is also the first time in 11 months that builder confidence has moved into positive territory of above 50.
The June reading of 55 was the strongest since July 2022. A year ago, the index stood at 67.
Key details: Builders were starting to pull back on sales incentives. The share of builders cutting prices to boost sales has dropped to 25% in June, from a peak of 36% in November 2022.
The typical builder was cutting prices by 7% in June, the NAHB said.
The three gauges that underpin the overall builder-confidence index were up.
Big picture: Due to pandemic-era monetary policies that depressed mortgage rates, the home buyers, real-estate agents, mortgage brokers and the rest of the industry are stuck trying to find solutions to a major supply crunch of homes.
Builders seem to be one of the few participants who have benefited from the supply crunch, given the nature of their business of new construction. The homebuilder ETF,
XHB,
is up 25% year-to-date.
What the NAHB said: “A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year,” Robert Dietz, chief economist at the NAHB, wrote.
And with the “Federal Reserve nearing the end of its tightening cycle,” the statement read, it’s “good news for future market conditions in terms of mortgage rates and the cost of financing for builder and developer loans.”
Markets were closed on Monday in observance of the Juneteenth holiday.
Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.
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If you invest in dividend stocks, you are probably looking for long-term growth to go with the income. Otherwise you might be content to hold one-month U.S. Treasury bills, which yield 4.5% or park your money in an online savings account for a yield close to 4%.
Below is screen of stocks with current dividend yields ranging from 4.14% to 8.46%. What sets these apart from other stocks with high dividend yields is that their payout increases are expected to accelerate in 2023 and 2024 from those in 2022.
On Tuesday, S&P Dow Jones Indices said in a press release that it expected dividend payments by publicly traded U.S. companies to continue to hit record levels in 2023. But Howard Silverblatt, a senior index analyst with the firm, said that the pace of dividend increases in the first quarter had slowed and that he expected this year’s increases to be “at half the pace of the double-digit 2022 growth.”
Silverblatt also said current events in the banking industry were “expected to negatively impact future spending from both consumers and companies, which in turn may curtail corporate dividend growth.”
For many banks, there’s another big item on the table. A focus on share buybacks in recent years is very likely to end — this is a use of cash that can raise earnings per share if the share count is reduced, but there can be consequences, especially after a year of rising interest rates that pushed down the market value of banks’ investments in bonds.
In a note to clients on March 16, Dick Bove, a senior research analyst with Odeon Capital, predicted that stock repurchases in the banking industry would be “meaningfully cut back if not flat out eliminated.” He made three general points about buybacks in the banking industry:
A company might find it much easier to curtail or stop buying back shares to preserve cash than it is to cut regular dividends. Preserving and increasing the dividend over time has been correlated with good performance for stocks over time. These articles provide examples of how dividend compounding is correlated with long-term growth as income streams build up:
The S&P Dow Jones Indices report raises the question of which stocks might buck the trend.
Starting with the S&P 500
SPX,
there are 71 companies stocks with current dividend yields of at least 4.00% indicated by annual payout rates. Among these companies, 68 increased dividends during 2022, according to data provided by FactSet.
Then we looked at the pace of dividend increases in 2022 and the consensus estimates for dividends paid during 2023 and 2024, among analysts polled by FactSet. Among the remaining 68 companies, there are 29 for which the estimated 2023 dividend increase is higher than the 2022 dividend increase. Narrowing further, there are 14 for which the estimated 2024 dividend increases are higher than the estimated 2023 dividend increases.
Here are the 14 stocks that passed the screen, sorted by current dividend yield:
| Company | Ticker | Dividend yield | Dividend increase – 2022 | Expected dividend increase in 2023 | Expected dividend increase in 2024 |
| Altria Group Inc. |
MO, |
8.46% | 4.5% | 4.7% | 4.9% |
| Newell Brands Inc. |
NWL, |
7.55% | 0.0% | 0.1% | 0.6% |
| Boston Properties Inc. |
BXP, |
7.42% | 0.0% | 0.7% | 1.0% |
| KeyCorp |
KEY, |
6.99% | 5.3% | 6.7% | 6.8% |
| Prudential Financial Inc. |
PRU, |
6.08% | 4.3% | 4.7% | 4.8% |
| ONEOK Inc. |
OKE, |
5.87% | 0.0% | 2.2% | 2.4% |
| Healthpeak Properties Inc. |
PEAK, |
5.54% | 0.0% | 2.1% | 2.2% |
| Dow Inc. |
DOW, |
5.16% | 0.0% | 1.1% | 2.2% |
| Iron Mountain Inc. |
IRM, |
4.70% | 0.0% | 1.8% | 5.4% |
| NRG Energy Inc. |
NRG, |
4.50% | 7.7% | 7.9% | 7.9% |
| Franklin Resources Inc. |
BEN, |
4.50% | 3.6% | 4.3% | 5.7% |
| Federal Realty Investment Trust |
FRT, |
4.38% | 0.9% | 1.7% | 2.1% |
| Ventas Inc. |
VTR, |
4.26% | 0.0% | 3.3% | 5.5% |
| Kraft Heinz Co. |
KHC, |
4.14% | 0.0% | 0.7% | 0.8% |
| Source: FactSet | |||||
Click on the ticker for more about each company.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Any stock screen is limited, but can be useful as a starting point or supplement to your own research. If you see any companies of interest, do some research to form your own opinion of how likely they are to remain competitive over the next decade, at least.
Don’t miss: This stock ETF keeps beating the S&P 500 by selecting for quality
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U.S. stocks were climbing Friday afternoon following a softer-than-expected inflation report for February, while the Nasdaq Composite was on pace for its largest quarterly advance since 2020.
For the week, the Dow is on track to gain 3% while the S&P was on pace to rise 3.2% and the Nasdaq Composite was heading for a 3.1% increase, according to FactSet data, at last check.
U.S. stocks were up sharply Friday afternoon as investors weighed data showing signs of moderating inflation.
“Core price pressures” eased in February, Barclays said in an economics research note Friday. “On balance, the easing in February PCE inflation was fairly broad-based across goods and services, barring housing.”
The personal-consumption-expenditures, or PCE, price index increased 0.3% in February, with inflation slowing to 5% year over year from 5.3% in January, according to a report Friday from the Bureau of Economic Analysis.
Core PCE, the Federal Reserve’s preferred inflation gauge that excludes energy and food prices, rose 0.3% last month for a year-over-year rate of 4.6%. That’s slightly lower than forecasts from economists polled by the Wall Street Journal and softened from the 4.7% increase seen over the 12 months through January.
Read: Inflation softens in February, PCE finds, and gives ammo for Fed rate-hike pause
While the Federal Reserve has been battling high inflation with interest rate hikes, futures traders are betting that rates have already peaked and that the Fed will likely reverse course and cut rates at least a couple of times before the end of the year, according to the CME’s FedWatch tool.
The market is pricing in a “coin flip” as to whether the Fed raises its benchmark rate by a quarter percentage point at its May policy meeting, said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management Co., in a phone interview Friday.
“We think we’re getting pretty close to the end” of the rate-hiking cycle, he said. Stucky expects the Fed may stop hiking once “cracks” start to form in the labor market, with job losses in “nonfarm payrolls.”
Meanwhile, consumer spending edged up 0.2% in February while personal incomes rose 0.3%, according to a Bureau of Economic Analysis report Friday.
“Incomes and spending are hanging in there and inflation’s cooling,” said Mike Skordeles, head of U.S. economics at Truist, in a phone interview Friday. “That has positive implications for markets” and the economy, he said.
Stocks traded higher following the release of the final reading on U.S. consumer sentiment for March from the University of Michigan. While confidence ticked lower compared with earlier estimates, inflation expectations moderated.
U.S. stocks have held up relatively well this quarter, shrugging off the Fed rate hikes and renewed recession fears. Since hitting its highest level of the year in early February, the S&P 500 has been trading in an increasingly narrow range, leaving analysts divided about where the market might be heading next.
“We need to see what the overall economy does,” said Kim Caughey Forrest, founder and chief investment officer of Bokeh Capital Partners. “I think GDP matters, and if GDP holds up while inflation comes down, that could be good for stocks.”
The Nasdaq Composite has risen around 16% since the start of the year, putting it on track for its best quarterly gain since the three months through June 2020, according to FactSet data, at last check. The technology -heavy Nasdaq jumped more than 30% in the second quarter of 2020 as stocks rebounded from the global market rout tied to COVID-19 that year.
The S&P 500 and Dow were also track for quarterly gains in late afternoon trading.
“The bond market is definitely more concerned about recession risks than stocks are,” said Skordeles, who is expecting a recession in the second half of the year. “They couldn’t be sending more different signals.”
Read: Two-year Treasury yields on pace for biggest monthly drop since 2008 after bank turmoil
New York Fed President John Williams said Friday in a speech at Housatonic Community College that stress in the U.S banking system will cause banks to tighten credit and probably lead to lower consumer spending.
—Steve Goldstein contributed to this article.
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The Biden administration approved the large-scale and controversial Willow drilling project for ConocoPhillips on Alaska’s oil-rich North Slope on Monday.
The approval, although with some conditions, is one of President Joe Biden’s most consequential climate choices of his first administration.
It’s a blemish, say environmental groups, to…
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This article is an excerpt from “Here Are Barron’s 10 Top Stocks for the New Year,” published on Dec. 16, 2022. To see the full list, click here.
With home builder
Toll Brothers
‘ stock down 30% this year, it might look like the roof is caving in. But that’s probably not the case. Yes, mortgage rates have doubled, but Toll (ticker: TOL), the top luxury home builder, is more insulated than its peers, due to the affluent buyers of its homes, which sell for an average of about $1 million. About 20% of Toll buyers pay cash, and many are selling homes for a lot more than they paid for them.
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The numbers: U.S. new home sales rose 5.8% to a seasonally-adjusted rate of 640,000 in November, from a revised 605,000 in the prior month, the Commerce Department reported Friday.
The November sales figure beat analyst estimates. Analysts polled by the Wall Street Journal had forecast new home sales to come in at 600,000 in November.
The sales of new homes are below a peak of 1.04 million in August 2020.
Year-over-year, new home sales are still down by 15.3%.
New home sales rose a revised 8.2% to 605,000 in October, compared with the initial estimate of a 7.5% increase to 632,000.
The new home sales data are volatile month-on-month and are often revised.
Key details: The median sales price of a new home sold in November was $471,200, down from $484,700 in October.
The supply of new homes for sale fell by 7.5% between October and November, equating to an 8.6-month supply.
Regionally, the West led the U.S. in the number of new homes sold, with new homes sold surging by 27.6%, followed by the Midwest.
Sales of new homes dropped in the Northeast and the South this November.
Big picture: 7% mortgage rates didn’t put a damper on new home sales, as seen in today’s report.
New home sales jumped in November, likely as buyers wanted to take advantage of incentives that builders are offering, from mortgage rate buydowns to price cuts.
Builders have been gloomy almost all year, fretting about lower traffic.
But with rates coming back down since, expect housing data to improve further.
What are they saying? “I suspect that builders are much more motivated sellers (especially given the surge in financing costs) than current homeowners, who do not want to part with their 3% or lower mortgages,” Stephen Stanley, chief economist at Amherst Pierpont, wrote in a note. “This may explain why new home sales are rising while existing home sales plunge. ”
But overall, sales are still weaker than usual: Stanley noted that combined existing and new home sales in November fell to the lowest level since 2011.
Market reaction: The Dow Jones Industrial Average
DJIA,
and the S&P 500
SPX,
were down in early trading on Friday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose above 3.7%.
Shares of builders, including D.R. Horton, Inc.
DHI,
Lennar Corp
LEN,
PulteGroup Inc.
PHM,
and Toll Brothers Inc.
TOL,
traded lower during morning trading.
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The numbers: The National Association of Home Builders’ monthly confidence index fell two points to 31 in December, the trade group said on Monday.
It’s the 12th month in a row that the index has fallen.
Outside of the pandemic, the December reading of 31 is the lowest level since mid-2012.
A year ago, the NAHB index stood at 84. The index’s 12-month drop is a new record.
But it’s not the biggest drop, the NAHB said. The drop in builder confidence between the end of 2004 and the start of 2009 was sharper; the index fell from 71 to 8 in that span.
Key details: The three gauges that underpin the overall confidence index were mixed:
All four NAHB regions posted a drop in builder confidence, led by the South and the Northeast.
Big picture: While builders continue to struggle to find buyers with the current rate environment, they’re also seeing a light at the end of the tunnel.
Buyers are slowly coming back to the table as mortgage rates are no longer above 7%, and home price growth is moderating.
And with 62% of builders offering incentives like mortgage rate buy-downs, paying points for buyers, and even price reductions, that luring some buyers, per the NAHB.
About 35% of builders were dropping home prices in December, the NAHB said, with the average price reduction being 8%.
What the NAHB said: “The silver lining in this HMI report is that it is the smallest drop in the index in the past six months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment,” Robert Dietz, chief economist at the NAHB, said in a statement.
“Mortgage rates are down from above 7% in recent weeks to about 6.3% today, and for the first time since April, builders registered an increase in future sales expectations,” he added.
But the NAHB is expecting “weaker housing conditions” to persist in 2023, and only forecasts a full recovery in 2024, Dietz said. There is still a gap of 1.5 million housing units, they estimated nationwide.
Nonetheless, the path to recovery is hard, the builders stressed.
“In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” Jerry Konter, chairman of the NAHB and a home builder and developer from Savannah, Ga., said in a statement.
“With construction costs up more than 30% since inflation began to take off at the beginning of the year, there is little room for builders to cut prices,” Konter added.
What are they saying? “We think home sales will find a floor by the end of the first quarter, helped by the near-75 [basis point] decline in mortgage rates since late October,” Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, wrote in a note.
“But a meaningful recovery is still a long way off, and home prices have much further to fall,” he added.
Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.57% on Monday morning.
While the SPDR S&P Homebuilders ETF
XHB,
traded slightly lower during the morning session, as well as big home builder stocks like D.R. Horton Inc
DHI,
Toll Brothers
TOL,
and Lennar
LEN,
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What worked well during the years-long bull market through 2021 — a focus on growth, regardless of price — has ground to a halt this year. The rebirth of the value style of investing — and modest valuations overall — has taken hold.
The approach taken by the Invesco S&P 500 GARP ETF has paid off through both bull and bear markets.
Let’s begin with a 10-year chart comparing total returns with dividends reinvested for the Invesco S&P 500 GARP ETF
SPGP,
and the SPDR S&P 500 ETF Trust
SPY,
which tracks the benchmark S&P 500:
So far this year, SPGP is down 12%, while SPY is down 16%. But the long-term chart shows significant and consistent outperformance for SPGP, even during the bull market.
GARP stands for “growth at a reasonable price.” SPGP tracks the S&P 500 GARP Index, which is reconstituted and rebalanced twice a year, on the third Fridays of June and December. The next change occurs Dec. 16.
S&P Dow Jones Indices assigns a growth score to each component of the S&P 500 by averaging the three-year compound annual growth rate (CAGR) for earnings and sales per share.
The top 150 components of the S&P 500 by growth score are eligible for inclusion in the GARP index. Those 150 are ranked by “quality/value composite score,” which is the average of these three ratios:
The top 75 of the 150 by QV rankings are then included in the GARP index and weighted by the growth score, with portfolio weightings ranging from 0.5% to 5%.
There is a weighting limitation of 40% to any one of the 11 S&P sectors.
The benchmark S&P 500 Index
SPX,
is weighted by market capitalization, which means it is more heavily concentrated than you might expect — success is rewarded, with rising stocks more heavily weighted over time.
That can backfire during a bear market, with Amazon.com Inc.
AMZN,
down 47% and Tesla Inc.
TSLA,
down 51% this year, to name two prominent examples.
Looking at the SPDR S&P 500 ETF Trust
SPY,
which is the first and largest exchange traded fund and tracks the benchmark index by holding all of its components, six companies (Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
Amazon, both common share classes of Alphabet Inc.
GOOGL,
GOOG,
and Berkshire Hathaway Inc.
BRK.B,
) make up 19.2% of the portfolio.
That percentage has come down this year, but a lot of risk remains concentrated in a handful of companies. (Apple alone makes up 6.4% of the SPY portfolio. Tesla is now the ninth-largest holding, making up 1.4% of the portfolio.)
One way to address high concentration in an index fund is to use an equal-weighted approach, which Mark Hulbert recently discussed.
For the Invesco S&P 500 GARP ETF, the underlying index’s selection methodology has resulted in much less portfolio concentration than we see in SPY, with the top five holdings making up 10.9% of the portfolio.
Here are the 10 largest holdings of SPGP:
| Company | Ticker | Share of portfolio |
| Regeneron Pharmaceuticals, Inc. |
REGN, |
2.49% |
| Cigna Corporation |
CI, |
2.26% |
| Everest Re Group, Ltd. |
RE, |
2.21% |
| Vertex Pharmaceuticals Incorporated |
VRTX, |
1.98% |
| D.R. Horton, Inc. |
DHI, |
1.97% |
| Expeditors International of Washington, Inc. |
EXPD, |
1.96% |
| Incyte Corporation |
INCY, |
1.92% |
| Goldman Sachs Group, Inc. |
GS, |
1.83% |
| Ebay Inc. |
EBAY, |
1.81% |
| Pfizer Inc. |
PFE, |
1.73% |
| Source: FactSet | ||
Click on the tickers for more information about any company, ETF or index in this article.
You should also read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
Don’t miss: 10 Dividend Aristocrat stocks expected by analysts to rise up to 54% in 2023
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The numbers: Construction on new houses fell 4.2% in October as high mortgage rates put off buyers and forced builders to scale back, a situation that’s likely to continue through 2023.
U.S. housing starts slowed to an annual pace of 1.43 million last month from 1.49 million in September. That figure reflects how many homes would be built in 2022 if construction took place at same rate over the entire year as it did in October.
Economists polled by MarketWatch had expected housing starts to register a rate of 1.41 million after adjusting for the typical seasonal swings in demand.
New construction hit a record 1.8 million in April before tapering off.
The number of permits, meanwhile, slipped 2.4% to a rate of 1.53 million, down sharply from a record 1.9 million last December.
Permits foreshadow how many houses are likely to be built in the months ahead, assuming a stable real estate market. But a major increase in mortgage rates this year has depressed demand and forced builders to scale back plans.
Key details: Single-family home construction fell 6.1% to an annual rate of 855,000 in October. Projects with five units or more registered a 556,000 rate, little changed from the prior month.
Housing starts are down 9% from a year ago, when mortgage rates briefly dipped below 3%.
Permits have fallen 10% from a year earlier.
Big picture: The highest mortgage rates in several decades have stifled new construction and are likely to do so through the next year or longer. The rate on a 30-year fixed mortgage recently topped 7%, more than double the rate a year ago.
While the U.S. has an acute need for more housing, fewer people can now afford to buy a home. Home prices are starting to come off record highs, but not by much.
Looking ahead: “Higher mortgage rates continue to exact a heavy toll on new construction,” said Richard Moody, chief economist of Regions Financial.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell in Thursday trades.
Related: Home prices will fall in 2023, but affordability will be at its worst since 1985, research firm says
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Investors cheered when a report last week showed the economy expanded in the third quarter after back-to-back contractions.
But it’s too early to get excited, because the Federal Reserve hasn’t given any sign yet that it is about to stop raising interest rates at the fastest pace in decades.
Below is a list of dividend stocks that have had low price volatility over the past 12 months, culled from three large exchange traded funds that screen for high yields and quality in different ways.
In a year when the S&P 500
SPX,
is down 18%, the three ETFs have widely outperformed, with the best of the group falling only 1%.
Read: GDP looked great for the U.S. economy, but it really wasn’t
That said, last week was a very good one for U.S. stocks, with the S&P 500 returning 4% and the Dow Jones Industrial Average
DJIA,
having its best October ever.
This week, investors’ eyes turn back to the Federal Reserve. Following a two-day policy meeting, the Federal Open Market Committee is expected to make its fourth consecutive increase of 0.75% to the federal funds rate on Wednesday.
The inverted yield curve, with yields on two-year U.S. Treasury notes
TMUBMUSD02Y,
exceeding yields on 10-year notes
TMUBMUSD10Y,
indicates investors in the bond market expect a recession. Meanwhile, this has been a difficult earnings season for many companies and analysts have reacted by lowering their earnings estimates.
The weighted rolling consensus 12-month earning estimate for the S&P 500, based on estimates of analysts polled by FactSet, has declined 2% over the past month to $230.60. In a healthy economy, investors expect this number to rise every quarter, at least slightly.
Take a look at this chart, showing year-to-date total returns for the three ETFs against the S&P 500 through October:
The three dividend-stock ETFs take different approaches:
All three ETFs have fared well this year relative to the S&P 500. The funds’ beta — a measure of price volatility against that of the S&P 500 (in this case) — have ranged this year from 0.75 to 0.76, according to FactSet. A beta of 1 would indicate volatility matching that of the index, while a beta above 1 would indicate higher volatility.
Now look at this five-year total return chart showing the three ETFs against the S&P 500 over the past five years:
The Schwab U.S. Dividend Equity ETF ranks highest for five-year total return with dividends reinvested — it is the only one of the three to beat the index for this period.
Together, the three ETFs hold 194 stocks. Here are the 20 with the lowest 12-month beta. The list is sorted by beta, ascending, and dividend yields range from 2.45% to 8.13%:
| Company | Ticker | 12-month beta | Dividend yield | 2022 total return |
| Newmont Corp. |
NEM, |
0.17 | 5.20% | -30% |
| Verizon Communications Inc. |
VZ, |
0.22 | 6.98% | -24% |
| General Mills Inc. |
GIS, |
0.27 | 2.65% | 25% |
| Kellogg Co. |
K, |
0.27 | 3.07% | 22% |
| Merck & Co. Inc. |
MRK, |
0.29 | 2.73% | 35% |
| Kraft Heinz Co. |
KHC, |
0.35 | 4.16% | 11% |
| City Holding Co. |
CHCO, |
0.38 | 2.58% | 27% |
| CVB Financial Corp. |
CVBF, |
0.38 | 2.79% | 37% |
| First Horizon Corp. |
FHN, |
0.39 | 2.45% | 53% |
| Avista Corp. |
AVA, |
0.41 | 4.29% | 0% |
| NorthWestern Corp. |
NWE, |
0.42 | 4.77% | -4% |
| Altria Group Inc |
MO, |
0.43 | 8.13% | 4% |
| Northwest Bancshares Inc. |
NWBI, |
0.45 | 5.31% | 11% |
| AT&T Inc. |
T, |
0.47 | 6.09% | 5% |
| Flowers Foods Inc. |
FLO, |
0.48 | 3.07% | 7% |
| Mercury General Corp. |
MCY, |
0.48 | 4.38% | -43% |
| Conagra Brands Inc. |
CAG, |
0.48 | 3.60% | 10% |
| Amgen Inc. |
AMGN, |
0.49 | 2.87% | 23% |
| Safety Insurance Group Inc. |
SAFT, |
0.49 | 4.14% | 5% |
| Tyson Foods Inc. Class A |
TSN, |
0.50 | 2.69% | -20% |
| Source: FactSet | ||||
Any list of stocks will have its dogs, but 16 of these 20 have outperformed the S&P 500 so far in 2022, and 14 have had positive total returns.
You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.
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The numbers: The National Association of Home Builders’ (NAHB) monthly confidence fell 8 points to 38 in October, the trade group said on Tuesday.
It’s the tenth month in a row that the index has fallen.
Outside of the pandemic, the October reading of 38 is the lowest level since August 2012.
A year ago, the index stood at 80.
The index’s ten-month drop is a new record. The index last fell for 8 months straight in 2006 and 2007.
Key details: All three gauges that underpin the overall builder-confidence index fell.
All four NAHB regions posted a drop in builder confidence, led by the south and the west.
It’s also likely that this year will be the first time since 2011 that single-family starts see a decline, the NAHB added.
Big picture: Builders continue to struggle to find buyers with the current rate environment.
Now they’re saying they’re worried about that depressed demand impacting supply moving forward.
Specifically, they’re concerned about housing affordability worsening, with potentially fewer new homes being built in the future.
Mortgage rates have doubled from last year, now exceeding 7%, which has considerably cooled buyer demand.
Home price growth is moderating, but prices have not come down substantially — yet.
The median sales price for a new home was $436,800 in August, according to the U.S. Census Bureau.
What the NAHB said: Builders are expecting single-family starts to fall for the first time in 11 years — and expect additional declines through 2023, said NAHB Chief Economist Robert Dietz, due to the Federal Reserve’s projected rate hikes to control inflation.
“While some analysts have suggested that the housing market is now more ‘balanced,’ the truth is that the homeownership rate will decline in the quarters ahead as higher interest rates, and ongoing elevated construction costs continue to price out a large number of prospective buyers,” he added.
“This situation is unhealthy and unsustainable,” Jerry Konter, a home builder and developer from Savannah, Ga. and the NAHB’s chairman, said in a statement.
“Policymakers must address this worsening housing affordability crisis,” he added.
What are they saying? “The housing sector – sentiment, building activity and sales – is collapsing under the weight of a rapid increase in interest rates and elevated prices, which are crimping affordability and demand,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a note.
So expect building activity to be depressed, she added.
Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
fell to 3.98% on Tuesday morning.
While the SPDR S&P Homebuilders ETF
XHB,
traded slightly higher during the morning session, and the big home-builder stocks, from D.R. Horton Inc.
DHI,
to Toll Brothers
TOL,
to Lennar
LEN,
edged higher.
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