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Federal Reserve Softens China Fears

Federal Reserve Softens China Fears

New trade comments by President Donald Trump threatened to send America's major stock indices to significant losses on Wednesday. Trump said that even though negotiations were "coming along nicely," the U.S. still was considering holding tariffs on Chinese goods in place "for a substantial period of time" until China fulfills certain obligations of a deal. But stocks rebounded swiftly in the afternoon after the Federal Reserve not only held interest rates steady, but indicated no more rate hikes through the end of 2019, which would help to keep corporate borrowing costs level. The Dow briefly jumped into positive territory before finishing 0.6% in the red, though the 25,745 close still was off the session lows.

Trump's China rhetoric, coupled with FedEx's (FDX, -3.5%) post-earnings comments warning about the negative effects of the trade tiff, are a considerable concern. But the Fed just did stocks a favor by ensuring that companies won't have to shoulder higher borrowing costs, freeing up that cash to spend on other things, such as rewarding loyal shareholders. Dividends are a popular way to do that. Investors love blue-chip stocks that return substantial amounts of cash, resulting in much-larger-than-average yields. But you can also achieve high income by investing in companies that aggressively grow their dividends -- your "yield on cost" will grow over time. But another way companies return cash is buying back their own stock -- a tactic that not only helps gussy up financial reports by affecting per-share data, but more importantly helps improve the worth of any remaining shares on the market. Just three months into 2019, dozens of corporations have pledged billions (and even tens of billions) of dollars on share repurchases. These 10 companies are leading the way.

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