Market Wrap-Up for Mar.7 (GPS, ROST, MTN, JPM, BAC, more)

The bulls were trying to re-ignite the fire today as the averages tried to ramp once again, ahead of the bank stress test results that were due out this afternoon. Most would expect the banks to be in good shape (as has been the case each time stress test results have been released as of late). However, today’s information should also give investors a better idea as to what degree we can expect higher dividend payouts from major banking stocks in the near future.

Looking at today’s movers, we had retail sales in the headlines with Gap Inc. (GPS) gaining on their results, while shares of Ross Stores (ROST) pulled back quite hard. Vail Mountain Resorts (MTN) was higher following the company’s earnings release and news of a higher dividend payout. Apache Corp (APA) shares gained on news the company may be looking to sell some assets in the Gulf of Mexico.

Getting back to the financials, shares of Bank of America (BAC) and JP Morgan (JPM) ended in the green, ahead of the stress test results due out from the Fed.

New Highs While Household Income Keeps Declining

Plenty of fuss is being made about the Dow hitting new highs this week. All the while, household income is still below 2007 levels. The argument has been the income levels have just been lagging and will eventually catch up. I’m not sure I buy that argument, considering the mindset many in the business world have today. Doing “more with less” remains the mantra and there is little evidence we are seeing much change there.

Companies continue to target well-paid execs as part of an overall “getting to the numbers” strategy. Forget those who have not kept up with the skills needed to thrive in today’s world. Those jobs are becoming much sought after, and with that, the salary levels for many of those positions have dropped in recent times. Government jobs remain the cream of the crop for those who have been unable to get a piece of the lucrative corporate salary pie. How things continue to play out will be interesting, as the market continues on a path of its own, and for those who can not participate, future prospects will remain uncertain.

Getting Your Hands Dirty

Having been in the workforce for a few decades now, you can imagine the number of things I have seen (as I’m sure plenty of my readership has) in my day when it comes to getting the job done. One thing I’ve noticed as I’ve climbed the ladder is that those who are positioned at the top tend to forget what it takes to get the job done. There is a show on television called “Undercover Boss” that highlights this forgetful fault many top executives tend to display. I remember one episode featuring the CEO of drain specialist Roto Rooter. The executive was elbow-deep in working on a clogged toilet — much to his displeasure. But it was in that moment he realized how out of touch he may have become with his company’s workers.

Now the corporate world may not be quite as back-breaking in terms of the physical toll, but the mental strain can be just as damaging. But for most companies, big and small, things have simply become a numbers game. Everything is measured, and unfortunately there are times the data doesn’t tell the true picture of what efforts are put forth to achieve the daily results. Wall Street especially is a numbers game. For a company, the end game is about beating earnings estimates, no matter what it takes to get there. “People” companies are becoming fewer and far between.

Eventually this trend affects what companies investors hold in their portfolios. That’s why we often see great brands fall from grace over time. Whether it is some key players leaving the organization, or employee morale taking a hit as the obsession with numbers takes over, questions arise about who is left to try and kick-start the brand’s dominance once again. For investors that don’t notice the changes to the bottom line, the effect on shareholder returns could be devastating in the long run.

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 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!

We have much more about why Dividends are so awesome if you check out our “What is a Dividend?” page here.

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 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

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- The Best Dividend Stocks List is used by tens of thousands of investors to help build their own portfolios.

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- 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!

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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