President Trump can’t get enough of war.
First, it was the trade war with China.
Now, it’s a trade war with Mexico.
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The president announced late Thursday that he will slap a 5% tariff on all imports from Mexico.
Mexico was Trump’s target, but investors took the hit.
Stocks traded lower across the board on Friday.
Some stocks traded lower than others.
General Motors (NYSE: GM) and Fiat Chrysler (NYSE: FCAU) were conspicuous losers. Both have large production facilities in Mexico.
By expanding his trade war to Mexico, Trump continues to shrink the universe of safe stocks.
Apple (NASDAQ: AAPL) is a burgeoning dividend aristocrat. It’s certainly an investor favorite.
But after Trump doubled-down with China at the beginning of May, Apple shares have lost 20% of their value. The company is a large operator in the Middle Kingdom.
An expanding trade war, like an expanding physical war, raises market risk.
Many investors have sought haven in U.S. Treasury securities.
The 10-year Treasury note has attracted more money than most. Over the past month, its yield has dropped to 2.16% from 2.56%.
If you’re an income investor, you likely want to seek havens elsewhere.
Ares Capital (NASDAQ: ARCC) and Coca-Cola (NYSE: KO) are two durable income havens. Neither has suffered any blow-back from the trade-war bombs.
On the high-yield end, you’d be hard pressed to find a more consistent, reliable income payer than Ares Capital.
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Ares is a business development company (BDC). It borrows at one rate and lends to mid-sized companies at a higher rate. The earned spread is distributed to investors as dividends.
When a BDC is good at performing this basic intermediary function, investors are rewarded with consistent high-yield income.
Ares has continually paid a dividend to yield 9% for the past 10 years.
And when business is really good, as it is now, Ares supplements the regular quarterly dividend with a special dividend.
It will supplement its next three quarterly dividend payments with a $0.02-per-share special dividend.
Ares shares can be a calming force. They were priced near $17 a decade ago. They’re priced near $17 today. Low volatility is a desired benefit during times of war.
I’m unsure if you can ever go wrong with a proven dividend grower – war or peace.
Few companies are more proven than Coca-Cola. The company has 56 years of annual dividend growth to its name.
The majesty of Coca-Cola dividend growth can be observed over the past 10 years.
The soda king paid a $0.82 per share annual dividend in 2009. It pays $1.60 today.
As the dividend goes, so goes the share price.
The share price doubled with the dividend.
Double the income, double the wealth.
Like with Ares Capital investors, Coca-Cola investors can expect low volatility.
The shares have barely budged on Trump’s trade-war buffoonery. History suggests that we shouldn’t be surprised. Coca-Cola shares are typically 70% less volatile than the overall market.
Ares and Coca-Cola are options to get through Trump’s trade war.
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As Trump Wages War With Mexico, 2 Stocks to Own
by Ian Wyatt