There was a growing chatter over the weekend regarding a Greece default, but there was no news out regarding this particular event as far as today’s session went. The market was swinging all around (as has been the case), and we saw a last-hour push up off the lows on rumors of China being a possible buyer of Italy’s bonds.
One of the names making news today and showing a bit of green on the screen was McGraw-Hill (MHP), which announced it will be splitting into two publicly-traded companies. There has been growing investor pressure to separate out the education business, which produces textbooks and other materials, from its capital markets business, which features its Standard & Poor’s credit ratings unit. Everyone may remember S&P being in the headlines for the U.S. debt downgrade it issued in early August. Also finishing higher on the day were some of the regional banks like M&T Bank (MTB) and PNC Financial (PNC).
On the flipside, Wall Street analyst downgrades weighed on several big names today including Novartis (NVS), Cummins Inc. (CMI), and United Parcel Service (UPS). When all was said and done, the market did manage to keep their recent Mondays’ winning streak alive.
It was great to see the Wall Street Journal give a big thumbs up to dividend investing in this past weekend’s story titled “Scoring Big with Dividends – Reinvest, Repeat – For Decades”. The article pointed to data from Fidelity Investments showing that over the eight decades ended September 2010, dividends contributed 44% of S&P 500 total returns. It also highlighted several slower-growth names we’ve liked ourselves, and how they have fared over the last decade. Consolidated Edison (ED) shares have returned 128% with dividends reinvested for the past ten years. In that same period, Chevron (CVX) is up 200% and Altria Group (MO) is up 300%. We still like all three of those companies, but are currently not recommending shares of Chevron for new investor money.
The article pointed out how dividend stocks tend to be less appealing to growth-obsessed investors, but that we’ve seen money pour into some of our favorite dividend names during recent dramatic market pullbacks. For the most part, traders don’t stick around too long and tend to be on to their way once the corrections have run their course. We’re perfectly fine with that, but there has been some money that has stuck around, especially bidding up recent REIT plays like Equity Residential (EQR), Simon Property Group (SPG), and AvalonBay Communities (AVB), for example. Why is this happening? We’re not exactly sure, but for some money managers, REITs are the easiest way to add exposure to Real Estate as part of their holdings. Again, we have not been as positive on the sector, but things could change if we start to see yields get back to more attractive levels. We have been cautious with many of the REIT names as yield levels have fallen to unattractively low historic levels.
Despite the many calls from analysts that stocks are cheap, we have remained vigilant in our calls for investor caution. On that note, we removed another two names from our “Recommended” list today, so be sure to check out our article detailing these downgrades if you haven’t already.
I hope everyone had a chance to check out our Dividend.com Premium members-only weekend articles, including the new features that highlight some of the biggest winners and losers from the week that was, such as analyst upgrades/downgrades and earnings/story stocks. These articles are a great way to catch up on the week that was in the markets. We also have a rundown of how various Dividend ETFs performed on the week.
Thanks for reading everybody. I’ll see you tomorrow!