Market Wrap-Up for June 2 (JOYG, CAT, GS, LTD, JCP, DE, more)

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It was a strong day for bonds yesterday as the odds of another recession have apparently increased. Make no mistake about it: market pullbacks like the one we saw yesterday (biggest 1-day drop going back to last August) are part of building a long-term foundation for investors. Getting rid of shaky investors/traders will eventually strengthen a stock's shareholder base and will lead to shallower pullbacks in times of overall market volatility. And as always, pullbacks provide better entry points for investors looking to get into the Best Dividend Stocks money can buy.

Getting into some individual standout names today, shares of Joy Global ( JOYG ) shot higher as the mining equipment play beat earnings estimates quite easily. This jump helped push up other equipment plays such as Caterpillar ( CAT ) and Deere ( DE ). News about a possible subpoena for Goldman Sachs ( GS ) and its role in the credit crisis had the broker's shares trailing throughout today's session. Monthly retail sales were out this morning and most of the retailers we follow were flat to lower. Noticeably weak were shares of Limited ( LTD ), JC Penney ( JCP ), and Family Dollar Stores ( FDO ).

Just a reminder, be sure to check out our weekly "Top 50 Watchlist Names" post that comes out each Thursday.

It's on days like we saw yesterday that dividend investors are the few that pull out a shopping list of stocks to buy. Traders on the other hand (most of whom trade long-side only) are scampering for the exits and likely nursing their financial wounds if they misread the market. As I mentioned on Sunday, legendary bond guru Bill Gross went on record last week with his statement that "Savers are being disadvantaged and will be disadvantaged for perhaps five, ten to fifteen years relative to debtors." He points to the example of what happened with interest rates in the U.S. during the 1946-1979. During that period, interest rates stayed right about at 2.5%, and offered substantially lower real interest rates. Mr. Gross sees the same scenario playing out once again, and I certainly would not be surprised to see the government to continue to keep rates as historically low levels. The fallout from this policy will be tough on anyone who is not willing to take on any investing risk in stocks. Social Security increases will be insignificant, if we get any at all. The last couple of years saw no increase and the latest prediction is for an increase of less than 1% for next year.

Dividend investing allows an investor the opportunity to put compound interest to work for them. I have several colleagues of mine who have been looking into income-producing real estate properties in the Northeast, who despite the tumble in real estate prices, have a tough time finding properties that work soundly from a cash flow standpoint. They want to pay $0 in premium for potential property value increases, as many real estate investors who were burned had been doing without even a second thought. Finding places to put your money is what many are struggling with today. Buying businesses is a good option, but only if you do your homework and understand the situation you will be embarking on. You can do well with a business, but there is risk you can lose your investment if you mess up the execution. Owning a business is definitely the riskiest of the three income-producing options above.

Frequently, we're asked by readers about exactly how to qualify to receive a dividend payout. Here is the short answer you need to know:

In order to receive a company's dividend payout, you must own the shares prior to the ex-dividend date. You can then sell the stock anytime on or after the ex-dividend date and still receive the payout.

I bring this point up because you'd be surprised at how many brokers give clients the wrong information when it comes dividend payouts and how you qualify for them. If you are someone who likes to invest around dividend dates, be sure to get on the same page with your broker so there are no assumptions to whatever you are looking to do with capturing dividend payouts. Of course, we prefer investors to look at the long term and build a quality dividend portfolio, but many readers are also interested in capturing dividends.

Dividend investors that are looking for income should not be distracted by the headline grabbers and instead be looking for opportunities in companies that are currently on our Best Dividend Stocks List . Our main focus is on quality dividend names with attractive yields, and this should be the main focus for all those that are hoping to build income for the long-term. We will continue to parse through our data to make sure only the names we like best remain on our recommended list. Remember, if we downgrade stocks from the list, it is not a sell call! Only in very rare instances will we advocate liquidating positions in a formerly recommended name. We just want to have the best names from a risk/reward standpoint on our recommended list for new money at all times. Investors should however utilize a sell strategy in the event a company you own drops 25% from its 52-week high and there are company-specific problems that could cause additional significant underperformance for that particular stock.

Thanks for reading, and I'll see you tomorrow! P.S. Please pass this e-mail on to someone you think can use some financial motivation as well as being kept in the financial news loop that could affect them.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

Referenced Stocks: CAT , DE , FDO , JOYG

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