Market Wrap-Up for Oct.18 (VZ, UNP, AXP, MS, PM, more)
As we dug into another morning chock-full-of earnings results, the lack of commentary regarding job growth from corporate America remains a key theme we are not losing sight of. One of the things that will be required to keep the economy from eventually going off a cliff is not just job growth, but also an increase in existing salaries. The recent data we have been monitoring shows nothing of the sort for middle-class employees. In fact, the trend has been flat to down.
Looking at specific earnings plays today, the early winners included names like Ethan Allen ( ETH ) (a furniture play riding the wave of any sort of real estate uptick), Travelers ( TRV ) (a rare quarter where "Mother Nature" remained calm), Verizon ( VZ ) (thank you Apple for new products), Polaris Industries ( PII ), and Union Pacific ( UNP ) (record earnings despite lower coal shipments). On the flip side, investors were pushing toward the exits in shares of Danaher Corp ( DHR ), American Express ( AXP ), Morgan Stanley ( MS ), and Phillip Morris International ( PM ) on the day.
Market Misconception About Target-Date Funds
I was reading about a survey from AllianceBernstein talking about the misconceptions investors have about target-date funds. When presented with the statement that target-date investment balances are "guaranteed never to go down," 34% incorrectly said the statement was true and 23% said they didn't know. Even worse, when asked to comment about the claim that target-date funds "guarantee that you will meet your income needs in retirement," 37% incorrectly answered "true" and 22% said they didn't know.
So in total, about 60% of those surveyed were totally uninformed about the investing reality of what they already own or intend to own. It's amazing, but many people don't seem to grasp the concept that nothing in the stock market is ever 100% guaranteed! Yet, some still believe the opposite. All of us in the investment research business work hard to avoid potential pitfalls, but investors need to roll up their sleeves as well and stop taking every nugget from the financial industry at face value.
We live in a super-competitive world where at any moment a new industry is rising, and the decline of a once-dominant one is declining. Paying close attention to these trends is a key part of the equation for those interested in building wealth.
Investing in real estate or other areas that produce income is hardly any different. You take your eye off the ball and you will lose money. Get into investments you don't understand and guess what, you'll lose money. Take the wrong advice from someone unqualified to give financial advice, and yup, you'll lose money again. The opportunities where you can skim the surface and expect to make money are few and far between. You can hit the lottery once in a while without knowing anything about anything, but for the millions that try it each day all across the world, what is the usual outcome? It's money lost. The concept is proven time and time again. The less due diligence done by investors, the higher the likelihood of losing money.
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.
Go Beyond This Newsletter
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Thanks for reading, and I'll see you tomorrow!