The markets were hoping testimony from Federal Reserve chairman
Ben Bernanke could help continue yesterday's rally, but investors
were unable to sustain the momentum as last-hour selling had the
averages closing mixed. Outside of saying the Fed will do
everything in their power if need be (meaning print more dollars),
we didn't expect anything substantial from the chairman.
Looking at individual movers, shares of non-dividend payer
Navistar (
NAV
) got hit hard, but investors did not panic with its competitors
like Cummins Inc. (
CMI
). This could be a case of what is bad for Navistar may be good for
Cummins. However, industrial names have been weak of late, so it
could be just a pause in the recent selling. Men's Wearhouse (
MW
) shares are plunging after the men's clothing retailer gave
cautious guidance on the heels of its latest earnings
results.
Best Buy (
BBY
) shares were down early on news the company's chairman was
resigning. The resignation carries a bit of extra weight as the
chairman will likely look to sell off his 20% stake in the company
at some point. In other news,
positive Wall Street analyst commentary
has shares of 3M (
MMM
) trading in the green.
China Rate Cut and the Markets
Investors may be asking if today's China decision to cut
interest rates will put a solid floor under the markets. The
reality is the last time China cut rates (March 2008), the global
markets still kept moving lower, eventually bottoming almost a full
year later. Time will tell if this scenario will repeat itself. In
the meantime, we will continue to rely on our research to keep only
the strongest possible names on our industry-leading
Best Dividend Stocks List
.
Look Out Below: The Dangers of Trading
I'm not sure if many of our readers saw the blow-up in shares of
mattress maker Tempur-Pedic (
TPX
) yesterday. The company's shares fell nearly 50% in one day and
are now trading at $22 and change. Here's the thing: many momentum
traders had been riding the stock's ascent, and plenty of
inexperienced traders were been hit hard as the stock plunged from
$87 in mid-April to its current levels in the low $20′s.
Let me explain how inexperienced momentum traders get burned. It
all comes down to discipline. The stock fell over 20% in late April
on big volume. Most inexperienced traders that didn't sell were
likely buying on that initial dip, figuring the sell-off was
overdone. The stock hung around in the $60′s for a few weeks until
the next break lower took the shares to the mid-$40s, at which
point, one figures they should buy more, and then if it rallies
back to the mid-high $60′s, to get out and break even. Well, many
traders' hopes were dashed following the company's earnings release
yesterday, after which the shares were cut in half.
I can guarantee that the above events took place for many TPX
traders recently. Trading requires insane amounts of discipline and
impeccable timing on both ends of the trade. If one of those
factors works against you, a little initial damage can wind up
knocking you out of the game completely.
No one likes to discuss the ugly realities of "when good trades
go bad," but these scenarios happen more often than you may think -
both to new and experienced traders. All it takes is one trade to
let your discipline slip, and you could be set back financially
quite a bit. That's why I street people away from the supposed
"thrills" of trading. The success rate is very low and the
financial hurt lasts a long time. I was lucky enough to walk away
from trading several years back in one piece, but only after
putting in countless hours of preparation week after week. I don't
miss that grind one bit, and I've found that long-term dividend
investing is a much more enjoyable exercise.
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!
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.
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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
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.