June 22, 2012
Written By Chloe Lutts Jensen
In this week’s Stock Market Crash Course, the experts are optimistic. Clif Droke, Mike Cintolo, and The Intelligent Investors’ Tarquin Coe all see more upside in their indicators. We also hear from Richard Moroney about what levels to watch in the coming weeks. Click below to watch the video!
Chloe Lutts, Editor of Dick Davis Investment Digest and Dick Davis Dividend Digest
Chloe Lutts is the editor of Dick Davis Investment Digest and Dick Davis Dividend Digest, and the third generation of the Lutts family to join the family business. For each Digest, Chloe reads hundreds of investment newsletters to select the strongest ideas for her readers. Prior to joining the Dick Davis Digests, Chloe was a financial reporter for Debtwire, a division of the Financial Times, covering fixed income, and before that, she reported on global debt markets for Institutional Investor. She also has previous experience at Cabot, writing about growing momentum stocks for Cabot Top Ten Trader and high-potential small companies for Cabot Small-Cap Confidential. She holds a B.A. in International Relations from Brown University, and also studied in Beijing and Paris.
10 Blue-Chip Dividend Payers to Own in 2012
A recent survey of our subscribers revealed that their greatest investing concerns are market volatility, economic uncertainty and maximizing dividend income.
As more and more Americans approach retirement age, and lose other regular income streams, I expect to see the last concern pop up more frequently. Fortunately, unlike market volatility and economic uncertainty, making your portfolio generate regular income is entirely within your control. And since it’s the focus of our Dick Davis Dividend Digest, I can help you.
There are a lot of fixed-income investments for investors to choose from: bonds and preferred stocks offer investors varying levels of security on corporate debt. There are always a few alternative income investments in every issue of Dividend Digest, but dividend-paying stocks are our main focus. And for all but the most conservative investors (those who really can’t afford to risk any capital, ever), dividend-paying stocks are a great way to generate income right now.
John Buckingham, one of our Dick Davis Dividend Digest contributors and editor of The Prudent Speculator, brilliantly explained the advantages of dividend payers in the latest Dividend Digest:
“Clearly, equity investors must steel their nerves for heightened levels of volatility, especially as the European sovereign debt crisis remains front and center, growth in stronger economies like China and Germany has slowed and recent economic statistics in the U.S. have been far from robust, but relative to Treasuries, dividend yields are as attractive as they’ve been in 50 years. Aside from several months at the height of 2008-2009 Global Financial Crisis, the last time the yield on the S&P 500 was above the yield on the 10-year Treasury was 1958. And the big plunge in both interest rates and equity prices on October 3 moved the forward yield on the S&P closer to the 2.8% yield on the 30-year Treasury! What’s more, corporations have actually been boosting their payouts as more than half (258) of the S&P 500 members have either raised or initiated a dividend this year.”
He continued, “It is nice to see the renewed interest in income, as we can’t forget that dividends and their reinvestment have long been a substantial contributor to the total return on equities. Data from Morningstar going back to 1927 show that through the end of last year, the income component of total return amounted to 41% for Large-Cap Stocks, 35% for Mid-Cap Stocks and 31% for Low-Cap Stocks. More importantly, our own analytical work going back 20 years and numbers we’ve crunched from Eugene T. Fama and Kenneth R. French dating to 1927 find that dividend payers have actually outperformed non-dividend payers over the long term and they have done so with lower volatility! Not quite the Holy Grail, but higher returns with lower risk is obviously a winning combination.”
It’s hard to argue with that.
In fact, I feel so strongly about the benefit of owning dividend-paying stocks that I published a brand new report highlighting 10 of the best income-generating stocks that should be in your portfolio.
In 10 Blue-Chip Dividend Payers to Own in 2012, you’ll gain access to the top dividend-payers that can bring you steady, secure income.
And you can get it FREE when you subscribe to Dick Davis Dividend Digest today. Learn more now!
Wishing you success in your investing and beyond,
Editor of Dick Davis Dividend Digest
P.S. Dividend-paying stocks have outperformed non-dividend-paying stocks by four to one over the past 35 years. The New York Times goes so far as to say that “without dividends, you would lose money investing in blue chips.” Don’t miss my new special report detailing 10 of the very best dividend-payers you need to own in 2012. Jump-start your portfolio today!
Tarquin Coe for Investor’s Intelligence, June 21 (Thursday AM):
“Equity markets seesawed yesterday, with the Fed’s statement being the catalyst. Importantly there was no violent sell-off. The rally remains in force and the swing lower enabled our shorter-term indicators to cool-off.
“The OEX Volatility Index, or VIX reflects yesterday’s intraday roller-coaster ride. It spiked in the immediate minutes following the statement but ended the session down as investors breathed a sigh of relief.
“Volume yesterday was down slightly, -2.8% on the NYSE. That can be construed as bullish. A healthy rally involves heavy volume on the up-days and lighter volume on days of consolidation.”
Clif Droke, Momentum Strategies Report, Wednesday PM:
“The recent lifting of the cyclical downside pressure from the longer-term weekly Kress cycle is the first potential avenue of strength for equities in the weeks ahead. This coupled with the positive seasonal factor we discussed last Friday [a significant correction in the first half of the year is often followed by a summer rally] offers the first line of defense for the bulls.
“The bulls should be able to seize on these factors if only they can put their perpetual fears of a euro-zone crisis to rest long enough to focus on the positives we’ve been discussing. On this score, the recent improvement seen in the semiconductor stocks is encouraging. Below is the latest update of the short-term semiconductor internal momentum index (SOXMO). It continues to improve on a daily basis, which is providing some upward pressure for the leading semi stocks.
“For the NYSE broad market, the internal momentum index known as HILMO also continues to improve on a short-term basis. There is still some negative cross-currents within the intermediate-term indicators but following a cycle bottom the short-term internal momentum currents usually trump interim momentum. Below is the short-term directional indicator for the NYSE (blue line) along with the momentum bias indicator (red line). Note that the directional indicator has just entered positive territory (circled).
“The dominant longer-term momentum indicator for the NYSE is also still in good shape as you can see here. This should provide additional support for the stock market during the early volatile stage of this recovery.
Michael Cintolo, Cabot Market Letter, Wednesday PM:
“The good news is that our intermediate-term Cabot Tides have flashed a new buy signal; three of the five indexes we track have turned positive, with the other two not too far behind. Our Cabot Trend Lines remain positive, meaning both of our trend-following indicators are now pointed up.
“That means it’s time to come out of our defensive stance and do some buying. … If we make money with our new buys, we’ll put more funds to work — but if not, we’ll back off.”
Richard J. Moroney, Dow Theory Forecasts pub Wed night:
“Bargain-hunting and expectations of continued support from the Federal Reserve have extended the rebound from the June 4 lows, with the Dow Transports showing particular strength. With near-term action likely to hinge on news regarding the global economy and the European debt crisis, we are taking a wait-and-see posture, holding about 10% to 15% cash positions while looking for opportunities one stock at a time.
“From the closing lows reached June 4, the Dow Industrials have rallied 6% while the Dow Transports have gained nearly 8%. The extent of the rebounds has removed any doubt regarding the significance of the June 4 lows, so a breakdown below 12,101.46 on the Industrials and 4,847.73 on the Transports would represent a bear-market signal under the Dow Theory.
“The rally has also put this year’s closing highs within striking distance. The Transports are just 3% below the Feb. 3 high of 5,368.93, while the Industrials are within 4% of their May 1 high of 13,279.32. With closes in both averages above those levels, the primary bullish trend would be reconfirmed — and the June 4 lows would no longer be significant.”
He also adds that both need to happen for the highs to be significant.