A dividend is the payment that a company distributes to its shareholders as a percentage of earnings. Management can decide whether to pay a dividend, how much it is, and the frequency of payments. A dividend is often distributed quarterly and is quoted as the amount of dividend per share. Companies that are growing fast tend not to issue a dividend, as they pour money back into the business.
Historically, investors who are looking for income have bought bonds and other fixed-income investments to generate yield. This unprecedented level of monetary policy has pushed interest rates to historically low levels. This means that income from bonds will be extremely low, and after taking inflation into account, it will actually be negative. The danger is that not only is an investor going to lose money over the long term, but they will also see dramatically lower prices for fixed-income instruments once interest rates start rising. At this point, investing in stocks that pay out a solid dividend yield makes sense as a prudent investment strategy. At this point, many people may be hesitant to look at investing in ... Read More
Historically, investors who are looking for income have bought bonds and other fixed-income investments to generate yield. This unprecedented level of monetary policy has pushed interest rates to historically low levels. This means that income from bonds will be extremely low, and after taking inflation into account, it will actually be negative. The danger is that not only is an investor going to lose money over the long term, but they will also see dramatically lower prices for fixed-income instruments once interest rates start rising. At this point, investing in stocks that pay out a solid dividend yield makes sense as a prudent investment strategy. At this point, many people may be hesitant to look at investing in st ... Read More
When looking at the historical returns of stocks, a recurring investment strategy that has been successful is to have some equities that have a dividend yield. Adding this type of equity to a portfolio can help boost long-term returns and smooth out the volatility. However, a dividend yield investment strategy is not as straightforward as simply looking for stocks that have the highest dividend yield. One must carefully choose equities for a portfolio that hit a number of criteria. A company can issue a dividend, but they are not forced to continue making payments, unlike a bond. A bond is a contract in which an investor owns a company’s debt, and the firm that borrows the money must pay according to the covenants o ... Read More
One of the most hotly debated topics these days is the role of activist investors. Some people have the impression that an activist investor is not a positive factor when it comes to long-term investing. I disagree, as many times, the investment strategy recommended by these activist investors ends up benefiting all shareholders. Probably the most well-known, and certainly the wealthiest, activist investor is Carl Icahn. One of the things I like most about Icahn’s investment strategy is that he is willing to buy when others are selling and be vocal about his intentions. A pe ... Read More
When many investors think of blue chip stocks, a common name that pops up is McDonalds Corporation (NYSE/MCD). A blue chip stock is traditionally a well-established company generating stable corporate earnings and usually paying out an attractive dividend yield. McDonald’s certainly hits the bull’s-eye on these blue chip metrics, which is especially attractive in today’s low-interest-rates world with its forward dividend yield of approximately 3.3%. The real question to ask is what is McDonald’s potential for corporate earnings growth over the next few years? There are two underlying f ... Read More
When you are looking at your portfolio and considering making adjustments, it’s important to take into account not only the current environment, but what potential changes could occur in the future that can alter your investment strategy. Here’s a perfect example of what I’m talking about: We all know that Japan has been trying to lower its currency in an attempt to stimulate its economy. What’s a side effect of a weaker economy? Higher import prices, and since Japan relies almost entirely on imported energy, costs are rising significantly, which is hurting the average Japanese citizen since wages are not increasing. Just recently, Japan announced that it is now dr ... Read More
There is a recent statistic that is quite shocking: the total amount of debt globally is now over $100 trillion, a jump of 40% over the last six years. According to the Bank for International Settlements, which is run by 60 central banks, since the financial crisis, the majority of the $100 trillion in debt has been issued by governments and nonfinancial corporations. (Source: “March 2014 quarterly review,” Bank for International Settlements web site, March 9, 2014.) You would think that with such a huge amount being issued, it would drive interest rates higher amid a debt crisis. But as we all know, the exact opposite has o ... Read More
One of the key tenets to success in the stock market, as I have learned from more than 20 years of trading, is the need to make sure you have a system in place to actively monitor your outstanding positions. Any major changes to the underlying fundamentals are critical. Unless you invest in mutual funds or are happy with a buy-and-hold strategy, ignoring your positions is not prudent and will likely result in damage to your portfolio—and maybe even your quality of life. In early October, when the Russell 2000 and the NASDAQ were down 14% and 100%, respectively, the thing to do was not to rush to the exits and liquidate everything. Making rash ... Read More
While it’s well known that technology has led the broader stock market higher, there is a safer and more conservative play for investors at this time, according to my stock analysis. Where? Investors may want to take a glance at the banking sector. Banks have dug themselves out of the financial crater that was imposed on the group by the sub-prime debt crisis back in 2007, which sent the global economy and banks into a massive tailspin, as is well represented in my stock analysis. But that was then. As my stock analysis indicates, the banking sector has been rallying over the p ... Read More
Don’t let the new records by the Dow Jones Industrial Average and S&P 500 trick you into thinking everything is fine in the stock market. Just take a look... We have the rising military actions against ISIS in Syria and Iraq that involve five Arab countries, which could really increase the geopolitical risk worldwide. China is continuing to deliver muted economic results and suggested there would be no additional monetary stimulus at this time. Meanwhile, the slowing in the eurozone and Europe, given the economic sanctions on Russia, will impact the demand for Chinese-made goods. And while the domestic economy is holding, th ... Read More
The flow of capital into the stock market continues to be directed toward lower-beta large-cap stocks and blue chips, and far less into growth and technology stocks. The comparative performance of the large-cap versus smaller-cap stocks also exhibits a movement of capital into bigger companies as the stock market adopts a more defensive structure. The risk in growth stocks is continuing to grip the overall stock market. With the move to safety, we are also seeing some capital flow into the bond market as the yield on the 10-year bond approaches the critical three-percent threshold. The higher the yield, ... Read More
The chase for high-beta stocks appears to be fading at this juncture, as we are seeing a shift in the risk profile to lower-beta and more conservative large-cap stocks in the stock market. After the staggering gains made by technology and small-cap stocks in 2013, it’s time to take a prudent approach to the stock market and refrain from chasing risk at this time. We are seeing a move to consumer staples stocks that tend to fare reasonably well in both up and down stock markets. While I favor small-cap stocks in an up stock market, the current tension in the stock market ... Read More
The stock market appears to be getting somewhat top-heavy. Scanning through my screens, I am quite amazed to find that the majority of S&P 500 stocks are well above their respective 200-day moving averages, which makes opportunities much more difficult to come by for the average investor who might look at their portfolio once a week or month.
But the buying in the stock market has still largely been with the technology, growth, and small-cap stocks, due to the higher potential to make quick money versus investing in blue chips or industrial companies.
Over the weekend, I met with a friend of mine. He’s been a stock market investor for some time now, and over the last few years—especially since 2012 and 2013—he has done phenomenally well when it comes to his portfolio performance. While talking to him about markets, he said something very interesting. His exact words were, “If you are investing in the stock market using fundamental or technical analysis these days, you are most likely going to lose money—or your returns will be dismal. The basic principles of investing hardly apply these days.” “Hold on; what?” I said. He explained: “Between 2009 an ... Read More
If you are saving for your retirement, it’s likely that you will have some exposure to the stock market, whether it is through mutual funds, exchange-traded funds (ETFs), or individual stocks. If there’s one thing I’ve learned over the years, it’s that you don’t have to be chasing the latest highflier to do well on the stock market. In fact, picking a solid blue chip name with increasing dividend payments to shareholders is often a much more fruitful and less stressful way to invest. Even in mature industries, you can do well over time by owni ... Read More
If you’re saving for retirement, you probably have some exposure to the stock market, whether it’s through individual companies, mutual funds, or exchange-traded funds (ETFs). Right now, the interest rate cycle favors the stock market, but a lot of investors aren’t very encouraged by the stock market and its potential for good returns. This is largely because of the extreme volatility we’ve had in share prices over the last 12 years. Big corporations seem to be doing great, but the volatility on the stock market can really wear you down. And depending on when you’re planning for retirement, the volatility of your investments can be directly responsible for your timeframe. Mutual funds have gone a long w ... Read More