JPMorgan says it's time to buy these unloved safe stocks that pay dividends

JPMorgan sees a buying opportunity in one unloved corner of the stock market — and investors are paid to wait for that upside. Low volatility stocks in the United States and Europe have done very poorly over the past few months, moving in the opposite direction of rising bond yields, said Mislav Matejka, the bank's head of global and European equity strategy. The companies are those with the lowest variation in price moves and are typically in sectors such as consumer staples, healthcare, utilities and insurance, as well as industrials, Matejka said in a note Tuesday. They also generally pay solid dividends. So far this year, co-called "low vol" stocks have had an inverse correlation with bond yields, with the subset of U.S. equities falling by 6% since the start of the Middle East conflict while bond yields have risen 55 basis points, he noted. One basis point equals 0.01%, and yields and prices move in opposite directions. On Tuesday, Treasury yields fell amid hopes for an Iran peace deal. "If bond yields continue to stabilize from here, low vol stocks could catch a bid, similar to earlier this year when the group was rallying as bond yields fell," Matejka wrote. On the other hand, if bond yields were to spike, with the 10-year Treasury moving toward 5%, low volatility stocks could also break their inverse correlation with bond yields and start to trade relatively better, he noted. The strategist expects lower yields in the medium term. …