As any trader knows,investing in thestock market can be
Many investors study past price charts and imagine how
muchmoney could have been made had they only bought here and sold
there. This type of investing based solely on hindsight and past
price movements can be dangerous to your portfolio.
This is because money is not made by looking at a chart of
what once was. It's made after you enter theinvestment , and the
entry point is always on the far-right edge of the where the
We would all be stock market multimillionaires if success
could be found by looking at what has happened. The truth is, no
one knows for sure what is going to happen after you buy or sell
a particular stock.
This is why success in the stock market is built upon
increasing the odds of profiting by utilizing time-tested
investment strategies,diversification and a long-term
Believe it or not, dividends make up the majority of the stock
marketgains over the past several decades. Investing in a
portfolio of high-yielding, dividend-producingstocks is a proven
But not just any high-yielding stock should be in your
portfolio. Sometimes high yields are a signal that something is
wrong with the company or are simplydividend traps to draw in
more investors prior to the dividend being slashed.
Carla Pasternak, the brains behind StreetAuthority's
newsletter, teaches that investors should look for companies that
have steadily increased their dividends over time. In addition,
companies that are yielding 5% to 7% make up the majority of
This is not to say that the ultra-high-dividend payers
thatyield 10% and more don't have a place in your portfolio --
it's just that they are the most risky. Companies in the 5% to 7%
yield range, combined with a 10% annual dividend growth rate, are
the crème de la crème of the high-yield universe.
You could painstakingly search for these perfect high-yielding
stocks to build your dividend portfolio -- but there is an easier
The stock I've come across is the
SPDR S&PDividend ETF (
Thisexchange-traded fund (
) does all the work for you when it comes to building a
diversified portfolio of high-yielding names. It is designed to
track and mirror the returns of the S&P High-Yield Dividend
AristocratIndex . This index comprises only the 50
highest-yielding companies in the S&P 1500 index that have
steadily increased their quarterly distribution each of the last
As you can imagine, SDY has handily beat the major indexes in
recent years. In the past five years, SDY has beaten the Dow
Jones industrial average by 23%, the Russell 3000 by 21%, and the
S&P 500 by 11%. It is up by more than 14% thisyear and boasts
nearly $12 billion in assets.
Here are the top 10 holdings of the High-YieldDividend
Risks to Consider:
The stock market has been in a super-bull phase this year.
Buying into thisETF is a vote of confidence that thebull market
will continue. It appears that the market will continue higher
until the Federal Reserve begins to tighten its policies. No one
knows for sure when this will occur. Be certain to always use
stops and position size properly when investing.
Action to Take -->
Buying into the strong uptrend right now makes good sense. My
12-month target on theshares of SDY is $90.
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