As October unfolds, market dynamics hint at a possible turnaround for investors, particularly regarding dividend-paying stocks. Renowned firm Bespoke Investment Group has analyzed trends from past years and identified the fourth quarter as a critical period for these equities. Despite a tumultuous beginning to the month, the outlook for the upcoming weeks appears promising, especially for select companies known for their consistent dividend payouts.
The onset of October marks the beginning of a unique seasonality pattern in the stock market. Historically, this month has ushered in a phase where three-month returns tend to peak, with October through December being particularly lucrative for shareholders. Bespoke’s analysis emphasizes that over the previous decade, dividend-paying stocks have notably excelled in the fourth quarter. The firm compiled a list of 30 dividend-yielding S&P 500 stocks, revealing an average return exceeding 11.5% during this period.
What drives this pattern? Several factors contribute to the robust performance of dividend stocks during the final quarter of the year. One key reason is the psychological impact of year-end financial planning, where investors seek yields that provide immediate returns. With the Federal Reserve’s ongoing interest rate cuts expected to come into play, dividend yields may offer a more attractive option compared to the historically safer Treasury Bonds, further incentivizing income-seeking investors.
Among the top performers identified by Bespoke is Tapestry, a renowned fashion house that owns the Coach New York brand. Tapestry stands out with an impressive average fourth-quarter gain of over 17% during the past ten years. In 2024 alone, Tapestry has achieved a year-to-date total return of approximately 28.3%, which accounts for reinvested dividends. With a current dividend yield of around 3%, Tapestry presents a compelling value proposition. This potential was recently recognized by JPMorgan analyst Matthew Boss, who has labeled Tapestry as an “overweight opportunity,” citing strong sales momentum, particularly for the Coach brand’s innovative products.
Following closely is KeyCorp, a financial institution that has historically performed well in the fourth quarter, boasting an average climb of nearly 15%. With a year-to-date return of over 21% in 2024 and a high dividend yield nearing 5%, the stock’s appeal is clear. Recently, Piper Sandler analyst R. Scott Siefers raised his price target for KeyCorp, underscoring confidence in its upcoming financial report, even though he adjusted earnings expectations slightly downwards due to external economic pressures.
Bespoke has also pointed to BlackRock, a giant in the asset management sphere, as a consistent performer during the fourth quarter. Over the past decade, its stock has averaged a nearly 14% increase in the final quarter. With a dividend yield of 2.2% and a total return of about 18% so far this year, BlackRock remains a robust investment option. Analysts from Wells Fargo have reiterated their bullish stance on the stock, predicting that 2025 might usher in significant inflows into fixed-income products as rate cuts prompt a shift in investor behavior.
Other notable dividend players include well-known institutions like JPMorgan Chase and Bank of America, as well as unique businesses like potato processor Lamb Weston, which further illustrates the broad appeal and potential of various sectors in delivering reliable dividends.
As market observers cautiously eye the month of October, the enduring strength of dividend-paying stocks continues to shine through. The combination of historical performance, favorable interest rate shifts, and strategic management decisions all contribute to a landscape ripe with investment opportunities. With the backing of trends observed over the last decade and the anticipated economic climate, dividend stocks could very well provide a cushion against market volatility. Investors are encouraged to consider these stocks as they develop their strategies for the last quarter of the year, taking note of the historical data that underscores their significance.
With October offering fertile ground, now might be the opportune moment for stakeholders to realign their portfolios towards these high-yielding prospects that promise growth alongside income.