The longest ever bull market has been experiencing corrections last year and even though it has recovered now, the investors are not that confident anymore. A general doubt about the economy future performance makes people change their positions within a stock market in favor of more certain holdings.
In the current market cycle level, which is obviously a peak, it is perhaps reasonable to limit the exposure and balance your portfolio towards a defensive investing strategy. One of the defensive sectors that have been performing well in recent months is Utilities.
The companies’ stock prices within utilities sector do not dance on the chart compared to other industries. They are stable and perform better in times of uncertainties such as corrections that have been around and might be around in the near future. Furthermore, they pay good dividends!
However, it is not an easy task to find a good dividend stock with growth potential at the same time. A serious level of stock screening together with enhanced fundamental analysis needs to be performed and thus, only a limited number of stocks stick out from the crowd.
One of such companies is PPL Corp. (PPL). Below are all the reasons and strategy how to trade it.
Generally, the utilities industry bottomed last year. PPL Corp. reversed its downward trend too and formed a rising channel since June 2018 (wide orange lines). Currently, the stock is consolidating towards a support level (thin orange lines), that could be the 100 MA where the price has just landed. Company is going release the earning results on 02 May and thus, the event may trigger a trading action.
However, we are not playing the earnings, we are looking at technical signals and thus, also timing the entry point would be perhaps suggested based on other indicators. RSI is approaching oversold level and therefore a reverse of trend might be soon. This would be supported by MACD line (black) crossing above the signal line (red) and Slow Stochastic would need to slope up as it is depicted by the green arrow.
The dividend yield is 5.20%, which is around the average for utilities sector. You do not want to pick a company with too high dividend, because it may not be able to keep it up in future.
The dividend payout ratio is 62% that is really good. The industry average ratio is around 90%. This means that the company will very likely keep the current dividend level or may even lift it up.
The company has been beating the earnings estimates at least four times in a row, which makes it a profitable firm that increases the probability of further stock price rise!
This is one of few trending stocks in this sector that poses a great fundamental background at the same time. This pick represents a good choice for long-term stock market investors that look for diversification in volatile times.