Want Dividends? Buy Treasury Bonds, Utilities or These Two Dogs of the Dow

An investment strategy during volatile times is to focus on dividends. TLT offers a dividend of 2.21%. XLU has a dividend of 2.99%. IBM and Exxon Mobil have dividends of 5.08% and 4.94%, respectively.
Author:
Publish date:

Investors seeking dividends should consider the 20 Plus Year Treasury Bond ETF (TLT) - Get Report, the Utilities select Sector SPDR Fund (XLU) - Get Report and International Business Machines (IBM) - Get Report or Exxon Mobil (XOM) - Get Report, which are members of the 2020 Dogs of the Dow.

TLT offers a dividend of 2.21%. XLU has a dividend of 2.99%. IBM and XOM have dividends of 5.08% and 4.94%, respectively.

Here’s How to Trade These Choices Now

TLT trades like a stock and is a basket of U.S. Treasury bonds with maturities of 20+ years to 30 years. As a stock-type investment it never matures. The interest income is converted to periodic dividend payments.

The Weekly Chart for TLT

Buy TLT Given The Safety Of U.S.Treasuries

Buy TLT Given The Safety Of U.S.Treasuries

Courtesy of Refinitiv XENITH

The weekly chart for TLT is neutral with the ETF below its five-week modified moving average at $138.48. It’s well above its 200-week simple moving average or “reversion to the mean” at $126.47. 

The 12x3x3 weekly slow stochastic reading is projected to rise to 37.96 this week, up from 33.71 on Jan. 3.

The horizontal lines are semiannual, quarterly and annual value levels at $136.53, $129.96 and $124.97, respectively. Its monthly risky level is above the chart at $152.02.

A close this week above $138.48 will upgrade the weekly chart to positive.

Trading Strategy: Buy weakness to the semiannual value level at $136.53 and reduce holdings on strength to its monthly risky level at $152.02.

XLU tracks the Dow Jones Utility Average which adds the element of stock market volatility.

The Weekly Chart for XLU

A Dividend Yield Of 2.99% Is Not That Compelling

A Dividend Yield Of 2.99% Is Not That Compelling

Courtesy of Refinitiv XENITH 

The weekly chart for XLU is positive with the ETF just above its five-week modified moving average at $63.73. It’s well above its 200-week simple moving average or “reversion to the mean” at $53.82. 

The 12x3x3 weekly slow stochastic reading is projected to rise to 70.31 this week, up from 67.97 on Jan. 3.

The horizontal lines are annual and semiannual pivots at $63.31 and $62.84, respectively. Its monthly and semiannual risky levels are above the chart at $66.02 and $67.70.

A weekly close below $62.84 is a warning that a correction will occur during the first quarter.

Trading Strategy: Reduce holdings on strength to monthly and semiannual risky levels at $66.02 and $67.70.

The Weekly Chart for IBM

Buy IBM For Its Dividend Yield of 5.08%

Buy IBM For Its Dividend Yield of 5.08%

Courtesy of Refinitiv XENITH

The weekly chart for IBM is neutral with the stock just below its five-week modified moving average at $135.10. It’s below its 200-week simple moving average or “reversion to the mean” at $147.89. 

The 12x3x3 weekly slow stochastic reading is projected to rise to 30.09 this week, up from 27.02 on Jan. 3.

The horizontal lines are quarterly and annual value levels at $124.47 and $122.42, respectively, with a monthly pivot at $133.31 and its semiannual risky level at $147.80 which lines up with the 200-week SMA.

A weekly close above $135.10 upgrades the weekly chart to positive.

The Weekly Chart for XOM

Buy Exxon Mobil For Its Dividend Of 4.94%

Buy Exxon Mobil For Its Dividend Of 4.94%

Courtesy of Refinitiv XENITH

The weekly chart for XOM is positive with the stock on the cusp of its five-week modified moving average at $69.73. It’s below its 200-week simple moving average or “reversion to the mean” at $80.34. 

The 12x3x3 weekly slow stochastic reading is projected to rise to 45.98 this week, up from 44.57 on Jan. 3. 

The horizontal lines are its quarterly value level at $67.06 with annual and semiannual risky levels at $79.64 and $81.05.

A weekly close above $69.73 keeps the weekly chart positive. 

How to Use My Value Levels and Risky Levels:

The closes on Dec. 31, 2019, were inputs to my proprietary analytics and resulted in new monthly, quarterly, semiannual and annual levels. Each uses the last nine closes in these time horizons.

New weekly levels are calculated after the end of each week. New monthly levels occur after the close of each month. New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.