5 Top-Ranked High-Yielding Growth Stocks for September

On Sep 14, Wall Street ended sharply higher, starting the new week on a positive note. This is in contrast to the previous week, which was the worst one in several months. Stock markets are witnessing severe volatility this month after a spectacular rally for five consecutive months. Month to date, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in negative territory.

Market fluctuations may persist for a few more days. However, the worst of Wall Street is long over and the overall market movement should remain positive going forward. At this stage, it will be prudent to invest in regular dividend-paying growth stocks with a favorable Zacks Rank. The growth potential of these stocks will capture the market's upside while a high dividend yield will be useful if volatility persists for a longer period.

h3 Fed's New Inflation Control Policy/h3

On Aug 27, Fed Chairman Jerome Powell announced that the newly adopted "average inflation targeting" policy will allow inflation and employment to run higher together for some time in order to support the pandemic-ravaged economy.

The Fed's target of 2% inflation will remain unchanged. However, under the new policy, the inflation rate will remain higher than 2% along with increased employment for some time. This inherently means that the benchmark interest rate, which is currently low in the 0-0.25% range, will remain at that level for a longer period than expected.

A low interest rate will reduce the cost of capital for businesses and consumers have a lesser propensity to save due to a low deposit rate. Therefore, higher spending by businesses and consumers is likely to boost the overall economy and raise stock prices.

h3 U.S. IPO Market Flourishes/h3

The U.S. initial public offering (IPO) market will witnesses the busiest week this week since May 2019. This week, 12 IPOs are expected to raise around $6.8 billion from the market. These companies are looking to take advantage of the astonishing recovery of the U.S. capital market defying coronavirus-induced devastations.

A massive surge in IPO is indicating ample investor appetite for new stocks and growing confidence for risky assets like equities. In this regard, an ultra-dovish monetary stance taken by the Fed has helped Wall Street to reach a record high level. Heightened IPO activities mean bullish investor sentiment for the U.S. stock markets going forward.

h3 Wall Street Has Room to Grow Further /h3

The market is not overvalued. Historically, the average returns of the S&P 500 and the Dow in the last 23 U.S. Presidential election years were 11.3% and 6%, respectively.

Moreover, in its latest projection on Sep 10, the Atlanta Fed estimated 30.8% growth for third-quarter U.S. GDP after it plunged 31.7% in the second quarter. Furthermore, projections for U.S. corporate earnings for third-quarter and full-year 2020 are rising since early July, indicating growing corporate profits.

h3 Our Top Picks/h3

Growth investors are primarily focused on stocks with aggressive earnings or revenue growth, which should propel their stock price higher in the future. We have narrowed down our search to five high dividend-paying stocks each carrying a Zacks Rank #1 (Strong Buy) and Zacks Investment Research

Written By: Zacks Investment Research