High-Efficiency, Equity Plays Hit records in Rotation Defensive

Shares of Kellogg Company (K) and The Procter & Gamble Company (PG) are trading at 52-week highs while The Kraft Heinz Company (KHC), is pulling back after the second quarter earnings releases, the dawn of a significant rotation from growth stocks to high-yield plays. This morning, the horrible second quarter, the GDP could super-charge of this phenomenon, because these questions are classic defensive plays, which tend to outperform during recessions and economic crises.

Key Takeaways

  • Investors have opted for high-yield equities because the yields on the Treasury have dropped since 2019.
  • Dividend yields tend to fall as shares gain ground.
  • The strongest high-income returns are often the beginning of a new bullish trend.

Hundreds of stock now boast a higher yield than the 10-Year Treasury bills, forcing the income to mind the investors to flee the bond market and pick up shares of companies, sustainable distribution of dividends for the stories. However, caution is necessary to choose the right plays because distressed companies routinely offer big prizes to attract investment. These can work well in some situations, but they involve excessive risk, which includes price much more low and bankruptcy filings.

Keep in mind that the dividend yield is the decrease of these shares, the reduction of the apparent commercial benefits. Shot stocks with well-documented recovery strategies often provide the most prolific returns in the high yield group, at least in the early stages, the former laggards, Kellogg, and Kraft now reward investors after the exit of long-term downward trends. (For a recent review, see: Kraft, Heinz Stock Could Reward Shareholders in the Long Term.)

Dividends can affect the price of their underlying stock in a variety of ways. While the dividend history of a given stock plays a general role in its popularity, the declaration and payment of dividends also have a predictable effect on the market price.


Kellogg stock topped out in the upper part of $50 in 2007 and sold in the mid-$30 in 2009. He bounced back to the prior high in 2011 and broke out in 2013, entering a strong, but short of the upward trend, which has posted a record high of $87.16 in the summer of 2016. Aggressive sellers then took control of the ticker tape, cut one or more legs of the downward trend that eventually led to a seven-year low, near $50 in 2019. The stock posted impressive gains in January 2020, the trim in the low $70.

The price action tested 2019 support during the first quarter of decline, attracting buyers committed to in April, and has completed a return trip in the state of the high in the beginning of the week. The stock is trading at 21 months, on Thursday, increasing chances that the rally will stretch into 2018 high of $74.90. The forward dividend yield has fallen below 4.00% over the past two weeks because of the rapid share gains, but it is still well above the average for a stock of food.


Dow component Procter & Gamble broke out above the 2000 high of $59.19 in 2005, but the increase has made limited progress, rising to $75.18 at the beginning of 2008. The stock sold to a six-year low during the collapse of the economy and undercut of this level in less than a minute during the 2010 “flash crash.” The stock finally broke out to a new peak in 2013, but the buying pressure faded in the mid – $90 in 2014, marking a level of resistance that has limited the gains for the next five years.

The stock sold to the mid-$60 in 2015, to fill out a trading range that has held intact in a 2019 breakout that has booked impressive returns in February 2020 high at $128.09. The shares returned to that level this week, after a 34-point first-quarter decline and erupted after the company beat fourth-quarter 2020 estimates and raised 2021 orientation. Procter & Gamble currently pays a decent 2.46% dividend yield despite excellent upside, giving investors two good reasons to jump on board.

A flash crash is an event in the electronic securities markets in which the withdrawal of stock exchange orders quickly amplifies the decline in prices. The result seems to be a quick sale of the securities, which may occur in the course of a few minutes, resulting in dramatic declines.

The Bottom Line

High-efficiency, equity plays on the alarm clock as we head towards the dog in the month of August, providing income to the mind of the investor solid returns at lower risk.

Disclosure: At the time of publication, the author held Kellogg shares in a family account, but no positions in the other aforementioned securities.

Source: investopedia.com

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