dividend reinvestment
Avoid the Eurozone Mess: How to Profit Domestically
By Mitchell Clark for Daily Gains Letter | Mar 28, 2013
Most investors will consider utility stocks in saving for retirement, or when looking for regular stock market income while in retirement. This is a group that has a better track record on the stock market than you might think. Old economy stocks can still generate solid investment returns, even if they are well-established utilities.
The Dow Jones Utility Average has a good long-term track record of wealth creation, but it has not been without volatility. Clearly this is a group that is less volatile than many other stock market sectors and these stocks experience waves of enthusiasm from institutional investors.
Utility stocks are not for everyone. A lot of investors feel that they would be better off in faster-growing, brand-name companies that have long-term track records of paying dividends. But in terms of dividend yield, utility stocks are definitely a group that is worth looking into.
One of the standout utility stocks is The Southern Company (NYSE/SO). The stock has been a powerhouse wealth creator, with much less volatility than the rest of the group. The company’s long-term stock chart is featured below:
Stock chart courtesy of www.StockCharts.com
In my estimation, Southern is one of the few utility stocks that combine excellent dividend payments with solid potential for further capital gains on the stock market. Considering Southern today, you might say that it is fully priced with a current price-to-earnings (P/E) ratio of approximately 17. But the dividend yield is 4.3%, which is very substantial in today’s environment. And you know that this business is still going to be there and that people are still going to be moving to … Read More
Where to Find Certainty in the Stock Market with Cyprus on the Edge
By Mitchell Clark for Daily Gains Letter | Mar 27, 2013
There are a lot of great stocks out there with proven track records for making money. These are retirement stocks—brand-name stocks that pay dividends to create wealth. With dividend reinvestment, you can effectively compound this wealth in an easy, costless manner.
One blue chip company that I’d like to highlight is Johnson & Johnson (NYSE/JNJ), which has an outstanding track record of increasing its dividends to shareholders and achieving capital gains on the stock market.
I couldn’t get data for before 1972, but Johnson & Johnson has increased its annual dividends every year since then. Since 1972, the company’s stock has split three-for-one on two occasions, and two-for-one on four occasions. The company’s last share split was on June 12, 2001, and the stock is definitely due for another split.
On the stock market, Johnson & Johnson recently spiked 10 points higher. And that’s just since the beginning of January. The company’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
Track record-wise, the stock is up well over 10-fold within the last 20 years, and that’s just capital gains; that doesn’t include dividends paid.
Everyone knows Johnson & Johnson’s consumer products; the company’s baby shampoo is for sale virtually everywhere. But Johnson & Johnson is much more than that. It’s dozens of popular healthcare brands, skin creams, and medicines. The company’s pharmaceutical research in oncology, contraceptives, immunology, and vaccines is extensive. Finally, Johnson & Johnson manufactures implants, diabetes care products, and joint replacement products. It’s a company with hugely favorable exposure to demographic changes and an aging population.
Of course, this is why Johnson & Johnson is rarely … Read More
Great Dividend Stock Could Be Ready for Breakout
By Mitchell Clark for Daily Gains Letter | Feb 27, 2013
There are a lot of great dividend paying stocks out there, but a good number are trading right at their 52-week or all-time highs on the stock market. Equity investors know that it’s tough to buy a stock trading right at its high.
Among dividend paying stocks, E. I. du Pont de Nemours and Company (NYSE/DD), otherwise known as DuPont, is a higher-yielding stock that’s worth having on your radar screen right now. The company’s last two earnings reports weren’t the greatest, and the stock hasn’t participated like other successful dividend paying stocks in the Dow Jones Industrials.
DuPont has been in a stock market downtrend for the last two years, and it really hasn’t done much over the last dozen years. The stock currently yields around 3.6%, but its valuation is fair at around 16-times current earnings.
Like I say, DuPont is a company to watch right now because a lot of the stock market isn’t currently worth buying. Higher dividend paying stocks, especially those in the Dow Jones Industrials, are almost always worth buying when they’re down. DuPont’s long-term performance on the stock market is modest, but the one thing the chart below doesn’t include is reinvested dividends.
Chart courtesy of www.StockCharts.com
According to Morningstar.com, DuPont’s simple rate of return over the last 3.5 years (right after the financial crisis low) is about 45%. With dividend reinvestment, the return jumps to over 65%.
Currently, Wall Street expects DuPont to produce earnings growth of around 17% this year and 12% in 2014. Combined with the company’s dividend and valuation, those are pretty decent financial metrics if you’re a stock … Read More
One Way the Rich Are Getting Richer
By Mitchell Clark for Daily Gains Letter | Feb 14, 2013
For the most part, the rich keep getting richer, even when there’s a recession. Once you accumulate enough money, your money starts working for you; and the key to getting richer with your investments is dividend reinvestment. About 40% of the S&P 500’s total return over the last 70 years has come from dividends. And here’s the best part, you don’t have to go looking for highfliers or risky technology plays; boring blue chips compound wealth the fastest through dividend reinvestment.
Before the stock market got really popular (and when interest rates were higher), investors used compound interest to keep making money. The same concept is employed today through dividend reinvestment, and the numbers make a powerful case.
Say you invested in Bristol-Myers Squibb Company (NYSE/BMY) around this time four years ago, and you signed up for the company’s dividend reinvestment program, through which dividend income was returned to you in the form of new shares in the company. Back then, on the stock market, the company’s shares were trading around $22.00 a share. The company’s stock chart is below:
Chart courtesy of www.StockCharts.com
Today, the stock is worth just over $36.00 a share, providing a simple return on investment (ROI) of approximately 64%, excluding dividends. But, if you include the new shares you accumulated through dividend reinvestment, your investment return skyrockets to approximately 98% over the same period of time. (Thanks to Morningstar.com for the numbers.) That’s a big difference, and it’s the reason why the rich keep getting richer—even if Bristol-Myers didn’t move upward on the stock market, dividend reinvestment would still have produced positive returns.
Consider, for … Read More
One of the Best Ways to Create Wealth: Dividend Reinvestment
By Mitchell Clark for Daily Gains Letter | Dec 18, 2012
Right now we have a stock market that isn’t doing anything. Earnings outlooks are modest and so are investor expectations for capital gains. In fact, 2013 is shaping up to be a tough year for stocks and return on investment is likely to be very modest. This is why dividend income is so crucial to your savings and financial planning.
For our beginner investors, a dividend is the payment that a company distributes to its shareholders as a percent of earnings. Management can decide whether to pay a dividend, how much it is, and the frequency of payments. Dividends are often distributed quarterly and are 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.
Investing in the stock market isn’t for everyone, but one of the ways you can grow your wealth over time is to own higher dividend paying stocks, and reinvest those dividends into new shares. If you don’t need the income because you’re saving, dividend reinvestment is one of the best stock market investment strategies you can employ. More shares equal more dividends and your actual stock market returns begin to compound quicker than you think.
Consider, for example, a company like PepsiCo, Inc. (NYSE/PEP), which is stock with a long-term track record of wealth creation and rising dividends for stockholders. According to its history on the stock market, PepsiCo looks to have been a good buy every time it experienced a major pullback in its share price. The company’s recent stock chart is featured below:
Chart courtesy of … Read More
