July 20, 2012
Stock Market Crash Course: Higher Highs
Written By Chloe Lutts Jensen
In today’s Stock Market Crash Course, we hear from analysts who say the important market fundamentals are all positive, although several think the rally is still lacking something. Richard Rhodes lays out levels to watch in the coming days and weeks.
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.
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10 Blue-Chip Dividend Payers to Own in 2012
Dear Investor,
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,
Chloe Lutts
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!
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Transcript
Michael Cintolo, Cabot Market Letter, Wednesday:
“We continue to see many positive signs out there, including the fact that our trend-following indicators remain stubbornly bullish despite the wild ups and downs seen in the indexes.
“Our Two-Second Indicator is also generally constructive, as the number of new lows is drying up on each successive market dip (158 in mid-May and early-June, but then 93 during the late-June low and 62 during last week’s low). Plus, a good amount of stocks we’re watching are continuing to etch launching pads ahead of their quarterly reports this month and next.
“That said, we’re still not eager to throw more of our hard-earned money into growth stocks, and the main reason is simple: Growth stocks aren’t doing much of anything! Any stocks that are moving are defensive-type names–discount retail, telecom, food and beverage and the like, along with a smattering of housing and medical stocks. …
“If this market is really going to move higher, a bunch of growth stocks are going to participate. We continue to believe that earnings season, which is just getting underway for most stocks, is going to tell the tale. We’re optimistic that many names can lift-off on their reports — but we need to see it happen before getting aggressive.”
Clif Droke, Momentum Strategies Report, Thursday:
“Some positive earnings, including the latest quarterly report from chip maker Intel, led the broad market higher on Wednesday. Bank earnings were a mixed bag, but despite positive earnings from big banks like Credit Suisse and U.S. Bancorp, the financial sector was a notable laggard on a day when most major sectors were higher. …
“The stock market – while internally strong – still isn’t firing on all cylinders. The real pillar of strength behind the broad market has been the dominant longer-term internal momentum indicator. The NYSE longer-term indicator has been rising at a powerful rate of change, a rise that should continue in the coming days.
“The strength indicated by the market’s longer-term momentum should help stocks to ‘muddle through’ the mixture of positive and negative economic headlines as well as the European mess. Equities would be in even better shape if the financial sector were participating in the strength, however. Here’s what the Broker/Dealer Index (XBD) looks like as of Wednesday.
“Clearly there is room for improvement here, especially since the best bull markets are either led or at least confirmed by strength in the financial sector. For now we’ll have to accept that this is a split market and wait for improvement in the broad equities market before increasing our exposure.”
MAIN INDICATORS ARE POSITIVE
John Bollinger, Capital Growth Letter, Monday:
“Those who think that this is not a bull market would do well to consider the NYSE advance-decline line, which made yet another new high today. We may be in the midst of a patch of tough going, but there is no sign of internal deterioration of the sort we would expect if something were seriously amiss.”
AS FAR AS SENTIMENT GOES
John Gray, Investors Intelligence, earlier this week:
• 43.6% of advisors are bullish, which is still fairly low — a number above 50% would be a warning sign
Richard Rhodes, The Rhodes Report, Thursday AM:
“Since major support at the 200-dma zone held, prices have quietly moved higher in a series of rallies and corrections — with each correction showing a higher low, and each short-term peak showing a higher high. This, when taken in combination with the 18- dma/65-day exponential moving average support zone at 1335-1341 having thus far proven its merit — the forecast remains bullish for a test of the 1390 to 1450 zone before any material correction develops.
“… the probability of the upper level being tested rather good. This would put the S&P 500 20% above its 160-week moving average – a level that time and time again in the past has served as major resistance.