This Unknown Energy Play Could Dominate the Fed Cutting Cycle By Lucas Downey, Contributing Editor, TradeSmith Daily There’s a silver lining in all the recent market turmoil… Interest rates are set to decline. The Federal Reserve is estimated to cut rates two to three times in 2025. I believe three to four cuts is more likely, given that central banks around the globe are lowering rates, inflation is muted, and policy uncertainty is high. To that last point, the Fed is at the ready to react to any new data. And this tees up a great opportunity. As money market rates decline, investors will eventually seek a replacement for their lost income. One simple area ripe for some of that capital is dividend growth stocks. These are high-quality companies that have a history of raising their payouts year after year. And they’re able to do that because of a solid, healthy business. But it’s not just falling rates that makes this group appealing today… It’s the fact that these income payers actually outperform when volatility ramps up… like we’ve witnessed the last month. Today we’ll look at a couple of historical studies that prove dividend growth is a whopper of an idea today, tomorrow, and over the long run. And I’ll even provide a top-ranked dividend stock that’s trouncing markets in 2025… | Recommended Link | | | | A new way to potentially double your portfolio in today’s tricky market, by predicting the biggest jumps on 5,000 stocks, BEFORE they occur. And how a “disconnect” in today’s market has opened the best opportunity in 20 years to apply this new strategy today. Including 2 free recommendations from a historic breakthrough backed by 3 Wall Street legends. Learn more. |  | | Dividend Growth Stocks Tower Above All Others I often write about dividend growth stocks. I know a lot about them because I’ve been investing in this asset class for many years. The simple fact is, the best businesses on the planet tend to pay a dividend and raise it continuously… Think Apple (AAPL), Walmart (WMT), Mastercard (MA), etc. (Disclosure, I own WMT at time of writing.) Owning a basket of high-quality assets like this will make you wealthy. And to prove it, here’s a great study out of Ned Davis. It highlights that dividend growers and initiators have outperformed nonpayers massively since 1973. Dividend growers and initiators have average annual returns of 10.19%, well north of all other segments: 
Focus on these best-of-breed habitual payout raisers. And keep an ear out for companies that initiate a dividend – I recently wrote about Regeneron doing just that, and why I see it as attractive. But it isn’t just the long term that gets me excited about dividend growth… It’s the fact that now is a great time to consider the group. Dividend Growth Stocks Outperform When Volatility Rises Most stocks have been hit recently… my portfolio included. In 2025, the S&P 500 is down 1.96%, and the Nasdaq is down 5.93%. When markets dump, volatility jumps. And the biggest volatility gauge of them all is the CBOE Volatility Index (VIX). It measures the implied volatility of the S&P 500 over the next 30 days. When it jumps like it has in March, it indicates professional traders expect larger swings in equities near-term: 
Volatility is an investor’s best friend… if you know where to go when it strikes. Turns out, dividend growth stocks offer cover during stormy markets. Check this out… Since 1990, any monthlong period the VIX ends higher than before, dividend growth stocks outperform non-dividend payers by 1.1% But when the VIX really gets going in a month, jumping 20% or more, dividend growth names outstrip nonpayers to the tune of 1.9%: 
So, let’s take stock of where things stand. First, we learned that dividend growth stocks are a great bet long-term, especially with rates coming down. Second, we now know that this group can add ballast during stormy markets. All that’s left to do is isolate a top-quality stock to play this theme! One Top-Ranking Dividend Stock for 2025 TradeSmith is all about following the data to find winning trends… and hopping on for the ride. One easy winning trend in 2025 is the energy patch. Did you know that the S&P 500 Energy sector is the best performer so far this year? The group is up 6.85%, with another dividend-rich group, Health Care, up 5.92%: 
Now, don’t be surprised that energy stocks are doing well. Back in January we alerted you to the strength in the group and offered a signal study suggesting it’s a decent bet in 2025. In that piece we outlined a top-tier energy play. And today we’ll be doing the same with a stock that’s climbed 35.9% over the past six months: Expand Energy (EXE). EXE just vaulted to a new high after exploding 14.1% the last two weeks: 
If you’re unfamiliar with Expand Energy, it’s a producer of oil, natural gas, and natural gas liquids in the Haynesville Shale and Appalachian Basin. What’s interesting about EXE is expected sales and earnings growth for 2025 and 2026. Revenues are set to climb from $4.255 billion in 2024 to $10.55 billion in 2025 and $11.73 billion in 2026. Net income over the same period is set to surge from a loss of $714 million last year to a gain of $1.64 billion in 2025 and $2.2 billion in 2026. And its dividend yield is juicy at 2.1%… gaining in recent years. Finding leading stocks is all about finding the businesses growing their top and bottom line. And also being able to instantly quantify the overall grade for the company. TradeSmith’s Quantum Score does just that and gives EXE a very solid reading of 74.1… right in the sweet spot. Any scores above 70 are rated Buy: 
Now for the reason to buy EXE today… The 10-day rip of 14.1% is relatively rare. Even though the company’s only been public since 2021, we were able to find 32 prior instances when EXE gained 14.1% or more in a two-week timeframe. - A month later, shares average a 4.1% climb.
- Two months after, those gains pop to 7.1%.
Let’s tie this all together… Rates are coming down. Dividend growth is likely to benefit. Growing dividends not only work long-term, but they also enhance a portfolio when volatility spikes. The top-performing sector is Energy this year… And EXE’s explosive move suggests more upside is coming. There’s a whole world of opportunity in markets right now. Let TradeSmith expand your search with cutting-edge research. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily P.S. As a thank you to our TradeSmith customers… who are the reason we’ve been able to thrive and grow over two decades… Our CEO, Keith Kaplan, is doing something extraordinary. Something he’s never done before and will likely never do again. On Wednesday at 10 a.m. Eastern, during TradeSmith’s special 20th anniversary event, Keith is going to make several major announcements. He’s calling it The Big Reveal. It’s going to be one of the biggest days in the history of our company… And you won’t want to miss it. You can sign up for this free event automatically by clicking here. | 
No comments:
Post a Comment