Despite the market’s continued struggles with low trading volumes (finally saw a bit of tick higher today), we had more green on the screen today than we’ve had so far this week. We’re didn’t have much in the way of economic data spurring today’s move, however.
Earnings results from the likes of PetSmart (PETM) and Cisco Systems (CSCO) helped push the indices higher. Cisco also raised its dividend payout nicely. A Wall Street analyst upgrade also boosted shares of Monsanto (MON). On the flipside, Wal-Mart Stores (WMT) did not participate in the buying after investors were a bit disappointed with their results.
One of the reasons I’m excited to wake up each morning is that I know, deep down inside, that there are so many potential opportunities in business and investing that can come our way.
On the business end of things here at Dividend.com, we can see how well our hard work pays off. Compared to what I see out there in the financial media and research space, we know we are gaining great traction in the form of new readers and subscribers. We’re out-working and out-hustling all the major firms on Wall Street, along with the mainstream financial media as a whole. The quality of the service we bring to investors is second to none. We’re completely unbiased and never pull punches when it comes to telling investors the truth about the markets and business landscape in general. You can count on us to always bring you the “straight dope” about what we see going on out there.
We know investors are tired of lax investment research and analysis. How many times do we need to see analysts downgrading stocks like Groupon (GRPN), Radio Shack (RSH), or other stocks that have recently cratered — long past their initial Buy call was first placed? There are plenty of people in our financial field that are completely out of touch with the reality of the economy and marketplace. We’ll never be a part of that crowd.
Major analysts are often too busy pushing the company/broker’s agenda (albeit selling confusing products that are only “exclusive” investments to that firm’s client base). When clients get duped into buying the wrong investment ideas (think mortgage-backed securities or the Facebook IPO), they end up sometimes needing to sell their quality investment ideas to ease the pain of their losses. This is where we as analysts look at names that have maybe sold off too much and make sense from a risk/reward standpoint. Or look at a momentum trader who suddenly decides he/she too needs to be chasing yield, quickly lunging at the next great trade of the day, only to dump their “spur of the moment” yield play they mistakenly thought would be a core part of their long-term portfolio.
To have success in these markets, we need patience and persistence in our everyday approach: the patience to not chase investment plays that have little upside and much more downside, and the persistence to come back day after day to check to see if an opportunity has arrived. Dividend investors (and all income investors, really) know that getting caught up in any particular euphoria can be dangerous to one’s ability to build wealth over time. We have read the numerous headlines the last few years praising dividend stocks up and down, but we do our best to temper the enthusiasm to a more realistic level. Instead, we stay the course of finding the best investment ideas at any current time that we feel good about new capital going into.Commercial Property and the Liquidity Trap Hitting Investors
I follow other areas of investment interest along with the stock market, and commercial real estate is another popular area for income investing. Commercial and multi-family buildings come to mind when looking for income, but commercial property specifically has seen some real carnage over the past 5-10 years for investors and builders alike.
In the early- to mid-200s, many investors got caught up on the hype of the real estate bubble. Far too many new office buildings were built across the country, and builders and investors had unrealistic expectations for their cap rates (essentially the rate of return on a real estate investment property based on the expected income versus the purchase price). Additionally, far-too-optimistic upside projections only added more fuel to the fire.
Today, the glut of inventory in the commercial side of the market is immense, and many investors who bought near the top of the market will need to come crashing back to reality if they’re looking to sell right now. At a time where cash is truly king in real estate (but when isn’t it?), too many current property owners are poorly positioned to have any chance to get their money to work for them. The pride of not wanting to take a loss, especially a sizable one, prevents many investors from at least getting back some of their liquidity. Such is a terminal problem when it comes to any investment. The smartest investors realize that the first offer may very well be the best offer they get, and decide to cut their losses early rather than endure the continued pain. This point brings me to the next topic of discussion below.Sell When You Can, Not When You Have To
In the end, whatever type of income investor you may be (dividend stocks, real estate, businesses), you can never take your eye off the ball. Perhaps more importantly, you should never make decisions based solely on what has worked in the past.
Take your cue from the equity markets, and recognize the lessons being learned in corporate America, where companies and entire industries have seen their very existence wiped off the face of the map in just a few short years. Other companies/industries are just hanging on by a thread. Eastman Kodak and General Motors, for example, are two mega-brands that worked well for investors for decades, only to go totally bankrupt recently.
Many other well-known brands and businesses have also seen their best days. So too, have their share prices. We are in an environment where change happens more rapidly than ever before, and for those unprepared to be flexible in their thinking, the end game is fatal. Carefully consider where your stock portfolio, real estate holdings, or small business can realistically be in the next few years and adjust your plan accordingly. I can’t put it any simpler than that.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!