FRANCOIS’ NO. 1 DIVIDEND STOCK
Chief Income Strategist Francois Joubert is sharing his favourite dividend stock.
There are not a lot of companies that make profits in good times and in bad…
But what if I told you there’s a business that’s seen increased demand due to the Covid-19 pandemic… And this isn’t just a fluke.
Businesses like this one are extremely resilient – and tend to grow their bottom lines no matter the economic situation.
In fact, as I write its dividend yield sits at an incredible 10.4% based on its current share price.
And when you see why I think its share price has a long way to run up, you’ll quickly see why it’s my #1 Income stock for 2021.
Commodities are driving the FTSE 100 index up
Last week, the FTSE 100 rallied above 7,000 on strong buying volume.
This was because a number of the major commodity stocks drove the price up.
You see, the FTSE 100 is heavily weighted on major resource stocks. So when the companies prices rally – so does the FTSE 100.
I’m talking about major oil companies like BP and Royal Dutch Shell, as Brent Crude rallied above $70.
This then caused a domino effect, which pumped up the other heavy weighted commodity stocks (over 3.5%) including Rio Tinto, Anglo American, BHP Billiton and Glencore.
With high demand for oil, metals and resources, now that the economy is recovering – we can expect the FTSE 100 to continue to rally.
Here’s what Ipek Ozkardeskaya, senior analyst at Swissquote Bank said:
“The FTSE 100 is well positioned to benefit from firm oil prices and global reflation theme,”
Investors are waiting in HIGH expectations for the PMI numbers
Another major indicator which drives the FTSE 100 up, is the UK PMI (Purchasing Managers Index).
All you need to know is, the PMI shows the level of business activity that’s taking place.
Any rating above 50 is positive and attracts investors to buy stocks in the FTSE 100.
In April the score was 60.9. The UK has already seen a big pickup in demand for goods and services, which should follow for May’s results.
And now analysts are expecting the PMI score to increase to 62.2. Now if that’s not a buying signal, I don’t know what is.
Oh wait I do… The charts.
Why the FTSE 100 is showing a “by jove” 1,432 point rally
In the above daily chart, let’s look at March 2020.
At that point (start of COVID-19 worries), the market was crashing at frightening levels.
It crashed from 6,940 down to a low of 4,804.
It then took just over a year, to recover back to that 6,940 level.
During that time, it formed major Cup and Handle breakout pattern. (Shaded area)
This is a pattern that resembles a Cup (Big rounding bottom) with a small Handle (Small rounding bottom).
The resistance (ceiling level) that forms horizontally from the Cup and Handle is called a Brim Level. Which in this case, is at 6,921.
Then in April 2021, the price level broke up and out of the Brim level. However, I wasn’t convinced that the breakout was strong enough…
Next, the price retreated by to re-test the brim level. And that’s where I started seeing major buying volume and demand.
That leads us to where we are today. If the factors I’ve mentioned play out – we can see major upside for the FTSE 100…
We’ll use the Top-down calculation to work out my next price target.
Price target = (High - Low) + High
= (6,921 - 5,489) + 6,921
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Here’s how we’ll profit from the 30% FTSE 100 rally
There are two ways to profit from the FTSE 100 rally.
First, I can buy the FTSE 100 CFDs and hold it until it hits my target of 8,353.
And second, I can follow Pickpocket Trader’s service where Trader X will send out buying trade ideas on UK stocks.
Chief Strategist, Red Hot Storm Trader