Happy talk from Washington, consistently low unemployment, and a slowing pace of inflation have combined to support a positive market sentiment – but can it last? ‘Shark Tank’ star Kevin O’Leary believes it won’t, and he does not hesitate to list the headwinds that could bring ‘real chaos’ by the year’s end.
The key factor is higher interest rates. The Federal Reserve has already pushed rates up to their highest level in over 20 years, and the repercussions are spreading. O’Leary takes special care to point out the effects on the commercial real estate market, where the increased rates imply that commercial mortgage loans – of which $1.5 trillion is due to turn over in the next few years – will refinance at nearly double their current interest rate.
With already more than $64 billion in troubled commercial real estate assets, O’Leary also notes that commercial mortgage delinquencies were up to 3% by the end of 1Q23. Additionally, small businesses, constituting around 60% of the US jobs market, are already strapped for cash and credit as banks and other financial institutions tighten lending conditions.
All of these factors add up to a situation that demands a defensive stance; investors will need to find protection for their portfolios. The logical move – and the classic defensive stock play – is a shift toward dividend stocks. These stocks, with their combination of passive income and lower average volatility, offer a shield against potential downturns.
Wall Street’s analysts have tagged two dividend-paying stocks as compelling ‘Strong Buy’ candidates with promising outlooks. Let’s take a closer look.
Brookfield Renewable Partners (BEP)
The first dividend stock we’ll look at is Brookfield Renewable Partners. Based in Bermuda, the company claims a global footprint of diverse energy assets. Its portfolio includes a wide range of distributed energy and sustainable operations. Additionally, it features more conventional green energy projects, such as wind, solar, and hydro-electric power generation systems.
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