Posts Tagged ‘dividend stocks’
Bigger profits without bigger risks?
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Let’s face it: Ben Bernanke’s near-zero interest rate policies have been absolutely crushing conservative savers and investors.
At the same time, they have been sending pretty much all other asset classes higher and higher:
• The main gold ETF — GLD — is up 49 percent since the stock market bottomed in March 2009 …
• Junk bonds, as measured by a basic mutual fund like Vanguard’s VWEHX, have rocketed 41 percent over the same timeframe …
• And U.S. stocks themselves have been going gangbusters, gaining 98 percent since their lows of March 2009!
Over the last week, I’ve been having an ongoing conversation with many of you about all of this on my personal blog.
Some of you have been writing in about all the risks that are still out there — simmering inflation, the possibility of a renewed financial crisis, and geopolitical risks in the Middle East just to name a few.
And there’s no doubt that — despite the recent calm — there ARE still plenty of big risks out there.
Yet I don’t think it’s prudent to sit completely in cash while the rising tide carries stocks higher and higher, either …
Especially not when you’re literally getting paid nothing to sit things out!
So that brings up a very basic question:
How Can You Participate in Stocks
Without Losing Sleep at Night?
Is there a way to have your cake and eat it too? To get a stake in rising stocks without losing too much sleep at night?
I sure think so — using the very same strategy I’m using to help my own dad safely grow his $100,000 retirement account.
It will probably come as no surprise that dividend stocks are the pivotal part of this strategy. Why?
First, while many other investments are offering pitifully low yields, many blue chip dividend stocks are boasting annual dividends worth 4 percent, 5 percent, 6 percent or much more.
And unlike fixed-income yields, which never rise, dividend payments have the tendency to increase over time. That gives you built in inflation protection!
Second, dividend actions — positive moves like increases and resumed payments have been picking up from the depressed levels we saw over the last few years and I think that’s going to continue, especially because U.S. companies have record levels of cash right now.
Third, the extension of favorable tax rates on dividend payments only gives executives further incentives to continue paying out cash to shareholders and also means your payments are worth more after Uncle Sam takes his share.
Fourth, it’s been proven time and time again that dividend stocks hold up far better than non-dividend stocks during market downdrafts!
In Fact, a Well-Chosen List of Dividend Stocks
Can MAKE MONEY Even During Market Crashes!
On my blog last week, a poster named Joe asked me pointblank, “How have your picks fared over the past three years?”
Well, Joe, I’m proud to say that my proprietary approach to maximum income investing has proven so cautious and profitable, if you had followed every recommendation I’ve issued since I began publishing my newsletter in 2007 …
Not only would you have handily outperformed the S&P 500, you would have even made money during the most severe recession since the Great Depression!
There is absolutely no cherry-picking going on here. I’m counting:
- Our winners and our losers …
- Our open trades and our closed trades …
- And in times when the overall market was soaring and when it was sinking …
Through all that, my conservative, risk-averse approach to total return income left the S&P 500 in the dust!
In fact, since the first issue of my newsletter was published in 2007, my recommendations have outperformed the S&P 500 market average by a full 20 percentage points.
Not bad — especially when you consider the fact that I recommend only stable dividend-paying stocks and other income investments — never high-risk stocks.
If that doesn’t prove my point that you CAN invest in stocks with a high degree of safety, I don’t know what would!
Best wishes,
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
The Dividends Are Flowing Again
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Last year’s dividend numbers were the worst in more than half a century, as corporations large and small struggled with a lack of financing, weak economic conditions, and poor earnings. But now, things are finally looking up …
According to the latest data from Standard & Poor’s, February was a very solid month:
•45 S&P 500 constituents increased their dividends vs. 30 a year earlier
•Two companies initiated new payments (vs. none in the same month last year)
•And only one company decreased its payment vs. 18 cuts in February 2009 …
Plus, for the first two months of 2010, dividend-paying stocks also outperformed non-dividend-paying stocks in terms of capital appreciation — 1.57 percent vs. -0.24 percent!
Source: S & P Index Services
Does that mean everything is easy from here on out? Of course not.
Actual cash payments still fell on a year-over-year basis, and it will probably take a few more years before total dividend payments return to the highs previously reached in 2008.
So I still think you need to be selective in terms of the sectors and specific issues you choose.
Where Do I See Dividend Opportunities Right Now?
I try to diversify the Dividend Superstars portfolio in terms of sectors and industries. But I can think of at least four areas that I really like right now …
Dividend Hotspot #1: Big-brand consumer staples.
These are the firms that sell products that people won’t — or can’t — live without. Basic necessities like food, beverages, cigarettes and toothpaste.
As such, their businesses tend to be very stable. They often boast big brand names and long track records of success. And it would be very hard for an upstart to compete with them effectively.
In short, they thrive whether the economy plunges into recession or is growing like gangbusters.
Even better, my favorite consumer staples firms almost always boast big operations in foreign countries. That means they’re profiting substantially as fast-growing emerging markets adopt Western lifestyles and flock to American brands.
Most importantly — precisely because these companies are so darn stable and profitable — they typically reward their investors very handsomely by mailing out big, fat dividend checks like clockwork.
Dividend Hotspot #2: Utilities with strong dividend histories.
Wall Street brokers love to call these “widow and orphan” stocks because they’re supposedly so boring. And it’s true that these companies just chug along year in and year out, providing the basic services we need to live our daily lives. Water, electricity and gas are hardly exciting things to talk about.
At the same time, what’s not boring about utilities is that many have been paying dividends with amazing regularity and raising their payments every year for decades. And that means investors who buy these stocks get fatter and fatter checks every year.
Dividend Hotspot #3: Select master limited partnerships (MLPs).
While MLPs can operate all kinds of businesses, most are engaged in the transportation of oil, gas and other natural resources … typically through a vast network of pipelines that can span entire continents.
I think of these companies as “trolls at the oil bridge” because whenever oil or gas needs to get from a production field to an end destination, it generally has to go through an MLP’s pipeline. And when you own that pipeline, you get to collect a very nice toll in the process!
Plus, the fact that these companies generally engage in just the transportation of resources also limits the downside they experience when commodities prices take short-term dips.
Dividend Hotspot #4: Unfairly-punished Canadian royalty trusts (CANROYs).
As I mentioned three weeks ago, a lot of investors have written off these Canadian firms that buy the rights to royalties from the production and sale of natural resources. And for a while, I was one of them.
Reason: There has been massive uncertainty surrounding these companies. Namely, a law change that is going to affect them in a major way starting in 2010.
However, I recently did an in-depth analysis of individual CANROYs, including an examination of what would happen to them under a revised legal structure. And my conclusion was that a few of these former dividend darlings are worthy of new investment money right now.
Bottom line: Based on the latest dividend data, payments should only continue rising from here. And if you select the strongest stocks in the strongest sectors, you stand to not only collect fat income checks but also benefit from capital appreciation, too.
Best wishes,
Nilus
About Money and Markets
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Two Small Caps with Big Dividends
Most income investors ignore small companies. Conventional wisdom says that large, mature companies pay dividends and small companies don’t.
That’s hardly the case.
Nearly 10,000 small caps trade on U.S. exchanges. Of those, 3.3% carry a yield of 6% or more. Believe it or not, that’s roughly the same as the S&P 500 Index, where 3.6% of the companies on the index yield above 6%.
Overlooking small companies is a mistake. While many small firms retain their profits to reinvest in the business, others generate enough cash to fund growth and pay shareholder dividends.
It would be dangerous, of course, to assume that every small company is fast-growing and has a promising future. A little more vetting is required.
Let’s eliminate companies that are trading for less than $5 a share. These stocks are often being avoided because of a serious problem in the company’s business. We also want small companies whose shares are liquid: At least 100,000 shares should change hands daily.
These parameters bring the number of potential investments down to a manageable number. Here are two that stand out.
Capital Product Partners (Nasdaq: CPLP)
The circumstance that is playing in Greece-based Capital Partners’ favor could turn into a great opportunity.
Capital Partners owns and leases small and medium-sized oil tankers. Right now, its fleet numbers 18. Its long-term rental contracts for these vessels range from three to 10 years.
Nine of the company’s contracts expire in 2010. Where shipping rates end up when those contracts expire will shape the company’s future success. Shipping prices currently are lower than shippers would like, but pricing can change quickly. For instance, shipping rates have already risen more than +10% this month alone.
Capital Partners is reasonably valued right now. That’s likely attributable to the unknown future of international shipping rates. The company currently has a forward P/E of 10.5. The market sees some measure of hope in the future, though, as the company is selling for 1.5 times book value.Capital Partners currently yields 16.7%. Its 2008 earnings came in at $2.00; trailing 12-month EPS is $1.92, easily enough to cover the company’s $1.61 annual payout.
If you believe in a recovery and think it will lead to a rebound in global shipping, as I do, these shares are a steal. If you’re more pessimistic about the future, the next stock I’ve found might be just the ticket for you.
Regal Entertainment Group (NYSE: RGC)
The great thing about theater stocks is that economic conditions don’t really matter. People go to the movies even when times are tough because it’s relatively cheap entertainment.
What does matter to theater operators, however, is how good the movies are. While Regal doesn’t have any control over what Hollywood turns out, great movies people can’t wait to see drive traffic to the box office.
Regal operates more than 550 U.S theaters, about 7,000 screens. These theaters are regarded as among the best in the industry. About three-quarters have stadium-style seats, and each either has or is being upgraded with Sony 4K digital-projection systems that have out-of-this-world picture quality.
The company operates in 90% of the country’s top 50 markets and has an industry-leading 16% market share. Some 66 million people went to a movie at Regal in the second quarter, +12% more than the same period of 2008. Those customers also paid more, spending an average of $8.17 a ticket, up +7% from the previous year. This shot revenues up +17% for the quarter.
Regal earned has earned $0.54 per share during the past 12 months, a +15% gain from 2008′s results. At the stock’s current prices, that’s a trailing 12-month yield of just above 6%.
This stock can weather any economic storm, making it ideal for those who are worried about a prolonged downturn. However, a year filled with lackluster movies can really hurt this. Luckily, 2010 should be a banner year with names like Iron Man, Toy Story and Harry Potter gracing the marquee.
– Anthony Haddad
Staff Writer
StreetAuthority
