US President Donald Trump’s threats have come to fruition with new tariffs on Canada and Mexico taking effect on March 4, sparking a full-blown trade war. The retaliation from these countries has led to countermeasures, further escalating tensions.
Canada was the first to hit back, announcing tariffs on US goods, while China also imposed tariffs on some US products. This marks a significant escalation in the ongoing trade dispute between the US and its key trading partners.
The impact of these tariffs is already being felt in the markets, with the S&P 500 Index turning negative for the year due to the meltdown in March. The second half of 2018 saw similar crashes amid an escalating trade war during Trump’s first term, but this time, tariffs were introduced right at the start of his second term.
The US is heavily reliant on imports, and these new tariffs will likely disrupt various sectors, including the automotive industry. Companies with global supply chains are bearing the brunt of this uncertainty, with share prices taking a hit. Ford, General Motors, and HP have seen their shares fall amidst the trade tensions.
In the short term, consumers and US companies importing goods will bear the costs. Warren Buffett’s quote about tariffs being a “tax on goods” rings true. For investors seeking safer bets in this uncertain macroeconomic environment, American Electric Power (AEP) stands out as a promising stock to consider.
Three reasons why AEP is worth buying now are:
1. Regulated Utility Trading at Reasonable Valuations: As a regulated entity with predictable earnings, AEP’s valuation multiples are similar to their 10-year averages.
2. Data Center and AI Opportunity: The growing demand for data centers presents an opportunity for power companies like American Electric.
3. Growth Capex and Possible Reshoring: AEP is investing $54 billion over five years to grow its production and transmission assets, which could fuel demand in the US.
With a consensus rating of “Moderate Buy” from analysts and a target price of $113, AEP’s stock has run ahead of expectations. The company’s dividend yield of 3.5% is attractive, with long-term earnings per share growth expected between 6-8%. For risk-averse investors seeking quality and safe dividends, AEP is an attractive option amidst the current market uncertainty.
Source: https://www.barchart.com/story/news/31237966/1-safe-dividend-stock-to-buy-now-as-a-full-blown-trade-war-begins