Now that the results of the election are in, investors should review their portfolios to ensure they are prepared for the upcoming administration’s policies.
The U.S. stock market whipsawed shortly after the election. The Dow Jones Industrial Average fell 800 points in the immediate aftermath of Donald Trump’s victory, which may not have been priced in.
However, stocks quickly rebounded by rallying more than 250 points on Wednesday. By early Thursday, the Dow had hit a record intra-day high.
Three dividend stocks stand out as ones to consider as good bets under a Trump presidency. Here are stocks to buy now:
Stocks to Buy: Big Oil
The most obvious winners during a Trump presidency would be Big Oil. Trump has made no secret of his distaste with environmental regulations. It is likely that fossil fuel producers, such as Exxon (NYSE: XOM) and Chevron (NYSE: CVX) would receive more favorable treatment under a Trump administration.
Oil stocks, including Exxon and Chevron, were among the market’s best performers after the outcome of the election.
They could use a boost, as the approximately 50% decline in oil prices over the past two years has had a negative impact on Big Oil. For example, while Exxon still racked up $16.2 billion in profit last year, thanks in part to a $7.5 billion cut in capital spending.
For its part, Chevron earned $4.5 billion in profit last year. It is also aggressively cutting spending to stay afloat. Exploration and capital spending is set to drop $12-15 billion this year.
Unfortunately, the environment has not gotten much better so far in 2016. Exxon’s earnings-per-share collapsed 62% over the first half of the year. Meanwhile, Chevron posted a $2.1 billion net loss through the first six months of 2016.
A push for deregulation of the oil and gas industry could be a positive tailwind for Exxon and Chevron. Both companies pay significant dividends to shareholders. Investors buy these two stocks largely for their dividends.
Exxon is a Dividend Aristocrat, and has paid a dividend for more than 100 years. It has a 3.3% current dividend yield.
Chevron is also a high-yielder. Its 4% dividend yield is nearly double the average dividend yield in the S&P 500 Index.
Both companies have long track records of raising their dividends on an annual basis. Exxon Mobil has raised for 34 years in a row. Chevron recently raised its own dividend by 1%. According to the company, Chevron has increased its annual dividend payment for 29 consecutive years.
If the policies employed by a Trump presidency result in higher profits for Exxon and Chevron, shareholders should see continued dividend increases as well.
Stocks to Buy: Big Pharma
In addition to Big Oil, Big Pharma is likely to benefit from a Trump presidency. Trump made the promise of repealing The Affordable Care Act a key component of his campaign. With a Republican majority in the Senate and House of Representatives, it is a feasible scenario.
There are specific aspects of the Affordable Care Act that, if repealed, would benefit a company like Abbott Laboratories (NYSE: ABT). One is the 2.3% medical device excise tax.
In addition, pharmaceutical companies may face less regulatory heat over drug pricing.
As a result, Abbott Laboratories could be a primary beneficiary of Trump’s win. It has both a medical devices and pharmaceuticals business. Collectively, these two segments represent more than 40% of Abbott’s total annual revenue.
Abbott may see higher profits if the Affordable Care Act is repealed. Abbott’s earnings-per-share, adjusted for nonrecurring expenses and the effects of asset sales, rose 9% last year.
This is all potentially great news for its shareholders. Abbott returns a significant amount of its annual earnings to shareholders as dividends. In fact, Abbott has paid 371 quarterly dividends in a row, which goes back 92 years.
Abbott is a Dividend Aristocrat. It has increased its shareholder payout in each of the past 44 years.
Abbott stock has a 2.7% dividend yield, which is above the S&P average. Consequently, Abbott stock may generate high returns for shareholders under a Trump presidency.