Investors are cautious as they eagerly wait for Federal Reserve Chairman Jerome Powell’s annual address in Jackson Hole on Friday morning. A strong sell-off in the stock market and climbing treasury yield on Thursday suggest that investors are cautious about any unpleasant surprise. On Thursday, the Dow, the S&P 500 and the Nasdaq lost 1.08%, 1.35% and 1.87%, respectively, whereas the 10-year Treasury bond climbed 4 basis points to 4.24%.

Inflation is gradually moving in a favorable direction as CPI for the month of July rose slightly to 3.2% year on year, responding to a series of 11 aggressive rate hikes since March 2022. Minutes published from the Fed’s July meeting indicated that Fed officials expect a significant risk of inflation. Strong retail sales data and a tight labor market advocate the need for additional monetary tightening measures. Powell has hinted at further rate hikes this year to tackle higher-than-targeted inflation of 2% over the long-term period.

The retail sales for the month of July came in better than expected as inflation slowed. On Aug 15, the Commerce Department reported that retail sales jumped 0.7% in July due to increased online purchases, as well as food and beverage services.

Also, the U.S. non-farm payroll increased by 187,000, unemployment rates declined to 3.5%, and average hourly wage rates gained 0.4% in the same period. This suggests that the economy is still expanding in the third quarter, leaving room for additional rate hikes in anticipation that the slowdown in inflation could be reversed.

The Fed, by raising interest rates, wants to cool off demand by making borrowing money more expensive. The borrowing cost is currently at a 16-year high, which eventually impacts corporate profitability. Such a move by the Fed will slow down the economy, according to its expectations, to counter inflation. This raised questions about whether the Fed will be able to strike the right balance between inflation and interest rate to create a soft landing for the economy. Also, Moody’s downgrading of small and medium-sized U.S. lenders and the review of six banks citing funding risks and weaker profitability hit the panic button.

Internationally, China, the second-biggest economy in the world, is also in trouble as the data suggest contracting economic activity due to sluggish demand and a troubled real estate sector. Export and import for the month of July declined by 14.5% and 12.4%, respectively, in U.S. dollar terms from a year ago. The GDP grew 3% in 2022, the second slowest growth rate since 1976. This was weaker than what markets had expected. Also, investors are deeply concerned about default risk after China’s second-largest property developer Evergrande sought Chapter 15 protection in a U.S. bankruptcy court lately. 

Keeping in mind such a critical situation, prudent investors who wish to park their money for regular income and capital preservation can invest in dividend stocks. These companies, due to their well-established businesses, pay out regular dividends and remain profitable due to their proven business models. Companies that tend to reward investors with a high dividend payout outperform non-dividend-paying stocks in a highly volatile market.

On that note, let us look at companies like Cable One (CABO Quick QuoteCABO - Free Report) , Murphy USA (MUSA Quick QuoteMUSA - Free Report) , Dillard's (DDS Quick QuoteDDS - Free Report) , Virtus Investment Partners (VRTS Quick QuoteVRTS - Free Report) and Winnebago Industries (WGO Quick QuoteWGO - Free Report) that have lately hiked their dividend payouts.

Cable One is a cable company based in Phoenix, AZ. This Zacks Rank #3 (Hold) company provides Internet, cable television and telephone service primarily in the United States. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

On Aug 18, CABO declared that its shareholders would receive a dividend of $2.95 a share on Sep 15, 2023. CABO has a dividend yield of 1.8%.

Over the past five years, CABO has increased its dividend five times, and its payout ratio presently sits at 28% of earnings. Check Cable One’s dividend history here.

Murphy USA is headquartered in El Dorado, AR. This Zacks Rank #3 is a leading independent retailer of motor fuel and convenience merchandise in the United States.                   

On Aug 17, MUSA announced that its shareholders would receive a dividend of 39 cents a share on Sep 7, 2023. MUSA has a dividend yield of 0.5%.

Over the past five years, MUSA has increased its dividend seven times. Its payout ratio now sits at 6% of earnings. Check Murphy USA's dividend history here.

Dillard's is headquartered in Little Rock, AR. This Zacks Rank #3 company is a large departmental store chain featuring fashion apparel and home furnishings.

On Aug 17, DDS declared that its shareholders would receive a dividend of 25 cents a share on Oct 30, 2023. DDS has a dividend yield of 0.2%.

In the past five years, DDS has increased its dividend five times. Its payout ratio at present sits at 2% of earnings. Check Dillard’s dividend history here.

Virtus Investment Partners is headquartered in Hartford, CT. This Zacks Rank #3 company provides investment management products and services to individuals and institutions in the United States.

On Aug 17, VRTS declared that its shareholders would receive a dividend of $1.90 a share on Nov 15, 2023. VRTS has a dividend yield of 3.3%.

In the past five years, VRTS has increased its dividend six times. Its payout ratio at present sits at 32% of earnings. Check Virtus Investment Partners’ dividend history here.

Winnebago Industries is headquartered in Eden Prairie, MN. This Zacks Rank #3 company is a leading producer of recreational vehicles and marine products in the United States.

On Aug 16, WGO declared that its shareholders would receive a dividend of 31 cents a share on Sep 27, 2023. WGO has a dividend yield of 1.7%.

In the past five years, WGO has increased its dividend five times. Its payout ratio at present sits at 12% of earnings. Check Winnebago Industries’ dividend history here.