With the U.S. markets looking to shake off the recent weakness, all eyes were on the overseas markets for a sense of direction. Our markets have tended to follow the lead of Europe and Asia with a “you’re up, we’re up” and “you’re down, we’re down” approach — and vice-versa. It’s a sort of merry-go-round of trying to find footing in what has been a very volatile past month or so. Unfortunately the overhang of today’s trading scandal involving Knight Capital (KCG) spooked some investors.
Monthly retail sales figures had a positive impact on shares of Gap Inc. (GPS), Macy’s (M), TJX Companies (TJX), and Target (TGT). On the other end of the spectrum, data was disappointing for investors who own Guess Inc. (GES), Best Buy (BBY), and Abercrombie & Fitch (ANF), which announced a big cut in earnings guidance. Moving on to earnings, some key names to the upside include Time Warner Cable (TWC), Metlife (MET), and Prudential (PRU). On the downside, investors saw red following results from Apache Corp (APA) and Williams Cos. (WMB).
Yesterday’s New York Times has a great story about hedge fund titan Louis M. Bacon returning $2 billion, or 25 percent of the main fund he manages at Moore Capital Management, to his investors. His reason? Mr. Bacon said he simply can’t invest when governmental actions (bailouts, printing money, etc.) affect financial markets more than basic economic/fundamental factors. In a nutshell, Mr. Bacon said the markets are acting unnaturally, making investing large sums of money extremely difficult.
Thankfully, as individual investors, we have a lot more flexibility than Mr. Bacon. We have the ability to move in and out of markets when we need to, unlike huge hedge fun managers with billions of dollars on the line.
That doesn’t mean I’ve advocating short-term trading, just that I see flexibility as a huge advantage for disciplined investors. If you know your investing strategy well, you don’t have to worry about risking your portfolio holdings’ values when it is time to exit a particular situation. Anyone investing in a hedge fund is certainly taking on a certain level of risk in the hopes the returns are higher than they can achieve on their own. But sometimes, the risk simply isn’t worth it.
The risk becomes especially high when someone needs to gain access to money because of a certain event in their lives (paying for a wedding, college tuition, buying a home, etc.) and are fully exposed to the wrong type of asset that can fluctuate wildly, causing too much uncertainty about the money being there when you need it.
For most investors and the vast majority of our audience, we tend to take a cautious approach to markets that are ripping higher and not break out the pom-poms to cheer-lead the already-frothy markets higher. If you’ve been reading this newsletter regularly, you know we’ve been highlighting the risks of investors chasing yield to unattractive risk/reward levels. That’s why we’ve been steadily trimming our Best Dividend Stocks List to only include the best possible high-yield risk/reward names.25 Years of Dividend-Increasing Stocks
We recently updated our list of dividend stocks that have been paying out dividends for 25 years or more. Be sure to check out the latest list of names here.Dividends Really Matter
Financial blog DailyReckoning.com recently took a look at the difference dividend payouts made in the overall return investors saw throughout the prior decades. Here are some of the highlights:
- The Nasdaq is down 28% since the end of 1999. Even the “blue chip” S&P 500 stocks are down 15% during that time frame…until you add back those “boring” dividends. With dividends included, the S&P 500′s 15% loss flips to a 6% gain.
- Without dividends, the S&P 500 index would have produced a loss for the 25 long years from August 1929 to August 1954. Then again, without dividends, the S&P 500 produced a 5% loss during the 13 years from September 1961 to September 1974. But with dividends included, the S&P’s loss became a 46% gain.
- Over the course of the last half-century, dividends have contributed more than half of the stock market’s total return — 56%, to be exact.
Of course, you can’t discuss the potency of dividend investing without making mention of how awesome compound returns are. I can’t stress enough the power of compound interest: you take a small amount of money and turn it into a large amount over time. Finding the right companies at the right price points which not only grow earnings, but also grow their dividend payouts as well!New Watchlist Article Out Today
Be sure to check out our weekly Top 50 High-Yield Watchlist Names post that is out today, exclusively for Dividend.com Premium members. This list gives readers a good idea of what stocks we’re watching behind the scenes here for potential upgrades.Go Beyond This Newsletter
We know many of you enjoy reading the daily newsletter, but remember that with our Dividend.com Premium service, the newsletter is just one small component of what we offer. Here are the “Big Three” benefits of our Premium service:
- The Best Dividend Stocks List is used by tens of thousands of investors to help build their own portfolios.
- Creating your own Watchlist allows you to track the performance, news, and upcoming dividend payouts of the particular stocks you care about.
- Finally, we offer the most complete and easy-to-use dividend data on the web. Many subscribers use this data as part of a “Dividend Capture” trading strategy, but long-term investors can use it to keep track of impending payouts. Just visit our Ex-Dividend Calendar for a complete outlook on which companies will be paying out soon.
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Thanks for reading, and I’ll see you tomorrow!