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Get Paid To Trade With Dividends
by Ryan Cole, Investment U Research
According to Wharton finance professor Jeremy Seigel, one of the more respected minds in economics, 97% of stock market gains come from one thing and one thing only.
Most people immediately assume one of three answers, but don’t fall to the same misconceptions that the masses do. Contrary to what you may think, the vast majority of stock market gains do not come from:
- Capital Appreciation – The occasional home run aside, stock prices tend to even out over time, at only a little better rate than inflation.
- M&A activity – Most investors won’t see takeovers or mergers make any real difference in their overall portfolio.
- IPOs – Though IPOs do represent some of the largest single-day moves, the underlying stocks usually settle down into normal trading patterns fairly quickly.
Instead, 97% of all the gains the stock market has ever produced since 1900 have come from one, safe, boring type of investment: Dividends.
More specifically, dividends reinvested in the paying company produce the vast majority of gains, since they allow compound interest to do its work.
Surprised?
Join the crowd. Just don’t doubt me if you want to make any real headway in this market.
Dividends – A Return To Basics
Over the past few years, dividend investing has become an afterthought for many investors.
Call it a hangover from the tech boom of the late ’90s when people made fortunes – and then subsequently lost most of them – on speculative tech companies that paid no dividends anyway.
But since the economic recession struck, investors have turned to more secure ventures… like dividends.
Gold and other traditional stores of value keep hitting all-time highs, with silver gaining 30% in the past month. The global community has largely lost faith in the dollar, and let’s just say that government bonds aren’t what they used to be.
No wonder so many prudent investors have taken all their money off the table!
But there’s just one problem to that understandable reaction: They don’t know how far this bull will run. For that matter, nobody else does either. It could climb significantly higher still, costing your profits that could haunt your portfolio for years.
So don’t give up quite yet. Instead, take all precautions, stick with strong, blue chip companies offering high dividend payouts, and enjoy the run for as long as it lasts.
Then, when everything comes crashing down, you can get paid to sit through the doldrums… clearly, a win-win situation, especially because downturns generally affect speculative stocks the worst.
Those blue chippers more often than not actually end up outperforming the market, since their dividends make them good stocks to fall back on during rough times.
With that in mind – we actually have an embarrassment of riches to choose from.
Eight Great Dividend Buys
Pharmaceutical companies represent one of the best dividend-paying sectors out there right now, especially considering the changes healthcare reform would bring.
Novartis (NYSE: NVS), for example, is paying 3.54%, while Merck (NYSE: MRK) offers a whopping 4.76%.
Both companies have healthy profit streams, extremely strong earnings-per-share, and most importantly have never cut their dividends. In fact, since it first sold as an ADR, Novartis has actually raised its dividend every year.
But we understand if you don’t want any more exposure to drug companies. So if that’s the case, check out household goods like:
- Kraft Foods (NYSE: KFT), which pays a pretty 4.32% dividend
- Johnson & Johnson (NYSE: JNJ), with a 3.22% payout
- Proctor and Gamble (NYSE: PG), which forks over 3.10% to its shareholders.
Want to bet oil prices will rise along with an economic recovery? Then put your money to work with Chevron (NYSE: CVX), which will pay you 3.78% to invest in it.
Or think the tight times will continue and people will penny-pinch for the next few years? McDonald’s (NYSE: MCD) doesn’t foresee any dangers one way or the other, and will pay out 3.56% at today’s prices to shareholders.
And One To Grow On
While any of the above make great investment choices, if you don’t want to settle for any but the best, check out the most attractive sector: Wireless telecommunications.
After getting beat down for quite a while, it’s made a comeback… with a vengeance. And just to celebrate, Verizon (NYSE: VZ) is paying 6.38% dividends, while AT&T (NYSE: T) almost matches it at 6.10%.
At that rate, you’d double your holdings in just over a decade, even forgetting about any gains in the stock price.
Ultimately, regardless of which you choose to invest in, these companies remain good values despite the overbought market or the ongoing bull-bear market debate.
Buy-and-hold may not work so well these days, but at the least, these stocks merit a looser trailing stop discipline and a longer leash. After all, you get paid to hold them.
Enough said.
Ryan Cole
P.S. Dividend-paying companies may yield 97% of profits in the stock market, but there’s still a wealth of opportunities out there… if you just know how to look for them. Louis Basenese’ White Cap Report offers you the research into small firms with low debt, low competition and high demand. Click here to get into these explosive profits… all for a surprisingly affordable price that sweetens the deal even more.
- Stock Dividends: The Difference Between Success and Failure
- Nucor (NYSE: NUE) & The Golden Dividend Ratio
- Pocketing Nice Dividends with Hot Small-Caps
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One Response to “Get Paid To Trade With Dividends”
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September 27th, 2009 at 9:36 am
Where are you from? Is it a secret?
Thanks
Joker
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