Don’t Overlook Steady Income Plays in an Unsteady Market

The market may have hit a recent low in the past few weeks. Time will tell. Until we know more, uncertainty continues to reign. And many companies are now starting to report on the unusual conditions of the last quarter, which could lead to a further selloff.

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  • Companies with a large international presence are noting the effect that the strong US Dollar is having on their international operations. That’s leading to lower outlooks going forward.

    But if the economy starts to show signs of life, the strength in the dollar will likely wane. As that happens, international companies headquartered in the US will benefit from currency trends rather than get hit from them.

    One company getting hit now is Johnson & Johnson (JNJ). The healthcare company reported better than expected earnings, but warned on the full year thanks to currency fluctuations. While that happens, shares are reasonably priced for an international leader, at 17 times forward earnings.

    Action to take: Shares look attractive here for income investors. The stock yields about 2.5 percent here, and the company has a history of dividend growth. The stock also has a beta of 0.63, meaning that it’s less than two-thirds as sensitive as the average stock to the market’s wild swings right now.

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  • For traders, shares are likely to continue higher in time. The January $185 calls, last going for about $4.50, offer mid-double-digit returns on a continued move higher in shares in the next few months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.