Despite futures being up early on, the market was not able to make the sort if in-roads as we saw in Tuesday’s positive session following Monday’s dip. The recent jitters with gold prices plummeting has some investors wondering if equities may be in for a waterfall-like selling event as well.
In the face of today’s nervousness, we did have names like PPG Industries (PPG), Union Pacific (UNP), Pepsico (PEP), Verizon (VZ), and Sherwin Williams (SHW) racing higher following solid earnings results. A couple of names not seeing the same optimism on their earnings are Morgan Stanley (MS), UnitedHealth Care (UNH), and Phillip Morris International (PM). Regardless of the spike in volatility, high-beta players are going to continue making earnings bets, adding to the heightened risk for earnings over-reactions.
Check out all of our latest earnings coverage over at the Dividend Daily.“Look on the Bright Side, It’s Yielding Over 4%”
I had an interesting exchange with a friend yesterday who mentioned he was disgusted with his full-service stock broker. Apparently the broker was advising him to buy commodity names over the past year (one of the worst-performing sectors you could possibly own). One stock in particular, Freeport McMoran (FCX), was one of the biggest positions they acquired. After watching FCX get hit over and over again, my friend called his broker, only to be comforted by the fact the stock was now yielding over 4%. Never mind that his cost basis is in the mid-$40′s, while FCX current trades around $28.
I didn’t feel like adding any fuel to the fire by warning my friend that we’ve seen numerous sizable dividend cuts in the commodity space recently. But his broker’s consoling thoughts may well come up a bit short if the trend continues and FCX slashes its payout.
We talk about risk/reward when it comes to committing new capital, and investor discipline is key to avoid moving in on a particular stock situation that may be near the end of a run. When investors get desperate to put money to work is when mistakes often happen. Brokers can always find something for you to buy, no matter how risky the bet has to be for someone to hopefully see a return — let alone get their original investment back.
Don’t believe me? A recent Reuters article pointed out how lenders sold $18.5 billion in securities backed by subprime auto loans in 2012, compared with $11.75 billion in 2011. To make up for the risk of taking on increasing numbers of high-risk borrowers, subprime auto lenders charge annual interest rates that can top 20 percent. How well do you think this is going to pan out for any type of investors (institutional, insurance companies, hedge funds, pension managers, etc.) 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 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!
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 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!