When consumers go to any store and see a sale, they get excited to buy. When investors see stocks on sale, however, they’re fearful.
This recent market pullback, which has seen the Nasdaq drop over10% from its July highs, has played out quickly. But it also looks like a healthy pullback after a massive run higher this year. Investors can use this selloff to buy shares of great companies that are on sale now. Especially dividend-paying stocks
Dividends take some of the sting out of market swings. And they offer investors cash. That helps diversify over time. A strong dividend company also tends to grow its payout over time, making it the ideal stock to buy in a selloff.
This recent selloff has now hit across the board. Exxon Mobil (XOM) even took a dive last week, despite a strong earnings beat. The oil giant is up just 8% over the past year as energy prices have been lackluster. But that won’t be the case forever.
Action to take: Investors may want to buy shares at current prices. Exxon is a dividend growth stock with a current yield of about 3.3%, much higher than the S&P 500’s average of 2%.
For traders, shares are likely to see some rebound in the coming weeks. The October $125 calls, last trading for about $1.80, could see mid-double-digit returns or better on such a bounce.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.