As the market continues to price in potential worst-case
scenarios in Europe, now is a good time for dividend investors to
keep a shopping list handy. More dividend bargains could be coming
our way as quality stocks are pulled down a bit by the wider
market. More on this point below.
As far as the headline movers today, some of the earnings names
bucking the weakness included Wal-Mart Stores (
), The Buckle (
), and Precision Castparts (
). On the flipside, we saw selling in shares of Advance Auto Parts
), Gamestop (
), and The Limited (
) following their earnings results. Wall Street analyst downgrades
pushed shares of Abercrombie & Fitch (
) and Cintas (
) lower. Also, Tiffany & Co. (
) shares were down a bit, despite news of the company raising its
dividend payout by 10.3%. We did finally see gold prices (
) catch a bid as selling intensified. It has been tough sledding
for commodity investors in 2012.
Down Days and Weeks Inevitably Happen in our Investing
Dividend investors should never panic when the market's
inevitable down periods come around. As long as you stick to a
strict sell discipline, you'll be able to avoid holding on to
shares of companies that have lost their way for too long. Also, we
tend to look at down periods as providing some better entry points
for high-quality dividend names. So when the markets do pull back,
think offensively rather than defensively.
I understand that down days tend to make people nervous, but
that's human nature and totally expected. If a stock you own is
going down particularly hard on days the markets are not down so
much, you should always examine why that price action occurred.
Remember, even companies that were once titans in the business
world can crumble if their business model or execution erodes over
It pays to be proactive when it's time to pull the weeds out of
one's dividend garden. Flat performance doesn't worry me as much as
negative returns when the rest of the market is moving up nicely
over a period of time. The stock tape can sometimes warn us ahead
of time that we need to consider making changes, so as I said
above, be prepared to take action. Just avoid getting skittish if
it's simply the overall market pricing in potential bad news
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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
- 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
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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
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