Daily Gains Letter

dividends


Six Dividend-Paying Blue Chips Selling at a Discount

By for Daily Gains Letter | Nov 3, 2014

Six Dividend-Paying Blue Chips Selling at a DiscountOne 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 decisions at a time when stocks are selling off is dangerous. You could have sold some positions while waiting to see if the stock market could rally, which was the case.

For the majority of investors, you don’t need to be constantly staring at the screen, scanning every chart. What you need to do is be on the alert for any major changes in the sector, a company rival, or the company itself. Failure to recognize changes and red flags could result in major losses.

The risk for small-cap stocks is more intensified, as displayed by the Russell 2000 weeks earlier. Since then, the bounce has been good, with the index performing at its best in October. However, despite the rally in small-cap stocks, I would continue to be careful.

If you are in it for the longer-term, blue chips make the most sense, especially for the more conservative investors who look for steady long-term … Read More


Banks a Better Play Than Market-Leading Tech Picks?

By for Daily Gains Letter | Sep 26, 2014

Bank Stocks Are Now Looking Good for InvestorsWhile 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 past seven years, beefing up their balance sheets, cutting risk, and creating a much stronger overall structure.

The chart of the Philadelphia Bank Index below shows the upward move of bank stocks from their 2009 and 2011 bottoms. Bank stocks staged a nice rally, but retrenched from March to May 2012 on the European bank concerns and Moody’s downgrade of the sector. However, the group has since staged a rally back to above the index’s 50- and 200-day moving averages (MAs), as my technical stock analysis indicates.

Bank Index Chart

Chart courtesy of www.StockCharts.com

What has helped to drive the banks upward on the charts, based on my stock analysis, has been the recovering global economy and the rules set in place to help prevent excessive risk among bank stocks. At the core of the changes was the establishment of the “Volcker Rule,” which was economist and ex-Fed chairman Paul Volcker’s move to cap the speculative trades and risk banks are allowed to assume. Since these changes were put in place, … Read More


This Top Stock a Poster Child for Consistency

By for Daily Gains Letter | Apr 17, 2014

My Top Stock for Long-Term Investors to Rest EasyThe 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 makes it dangerous to pursue risk. This is a time you need to be in defensive stocks.

The big banks, consumer staples, and industrial sectors look decent for those wanting to continue to invest at this time. Momentum and growth should be avoided for now.

If you are looking for a singular stock market play that offers diversity and a defensive approach, take a look at time-tested General Electric Company (NYSE/GE), which has offered investors steady returns in the majority of periods since its beginnings in 1892.

General Electric (GE) is precisely what you want in this type of market. It’s extremely well diversified across many industries and geographical areas around the world.

The company prides itself on producing steady results to shareholders. Its management strategy is to hire CEOs for 20-year time spans that allow for stability.

GE is the poster child for consistency in corporate America.

The company isn’t going to make you rich in a short period of time in the stock market, but … Read More


Do Fundamentals and Technical Analysis Still Matter?

By for Daily Gains Letter | Apr 2, 2014

Stock MarketOver 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 and 2011, you could have found some opportunities in the stock market, and there was still value available. After the summer of 2012, it all changed. The stock market is now dictated by financial engineering.”

He went on to say, “Don’t just take what I say; see for yourself as well. Look at the stock performance of the companies that are buying back their shares. Look at the companies that are increasing their dividends. You will see their stock value has risen significantly despite very minute changes in their fundamentals in the last couple of years. If their chart was forming a bearish pattern and you traded accordingly, you probably incurred a loss.”

He is right!

Since the summer of 2012, the stock market has risen significantly. If you look at key stock indices like the S&P 500, its return since June 2012 to the end of 2013 was almost 36%. This means that if you invested $1,000 in the stock market on June 1, 2012 and closed … Read More


How Global Debt of More Than $100 Trillion Is Threatening Your Portfolio

By Sasha Cekerevac for Daily Gains Letter | Mar 12, 2014

Global DebtThere 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 occurred with interest rates still near historic lows.

What’s really shocking is that governments and corporations have borrowed and pumped out a massive amount of money, yet the global economy is barely moving. We know why corporations have issued the debt; with interest rates low, it does make sense to take advantage of the environment, borrow money, and fund share buybacks and dividends.

Of course, it makes one ask the question—if high levels of debt fueled the previous debt crisis, can we fundamentally solve this problem with even more debt? Not likely.

The real question for investors who are allocating capital to these markets is: are they suitable for long-term investors, or should we consider if a debt crisis is possible?

With the situation in Ukraine deteriorating along with other parts of the world, such as Venezuela, this is creating a flight to the perceived quality of the bond market in the developed world. However, long-term, I’m not so sure.

With the U.S. … Read More


Are ETFs Really the Best Investment for You?

By for Daily Gains Letter | Mar 7, 2014

Pros and Cons of Indexed InvestingOne of the investment strategies discussed in the mainstream these days is to add exchange-traded funds (ETFs) to your portfolio. It is said that when you do just that, your portfolio has lower risks and you are well diversified.

For investors who are not as advanced, when it comes to investing; this investment strategy makes sense. For those who are advanced, they shouldn’t fall for this investment strategy; they may be better off going the other way—buying individual stocks instead.

Let me explain…

Between March of 2009—when the bull market run started—until February of this year, if you bought the most famous ETF for your portfolio—that is SPDR S&P 500 (NYSEArca/SPY), which tracks the S&P 500—your returns would be more than 185%. Plus, there would be dividends. Including dividends, your returns would be just over 200%.

But, saying the very least, you could have done better.

If instead of buying the SPY at the time when markets were presenting investors with an opportunity of a lifetime you bought a company from the S&P 500 like General Electric Company (NYSE/GE), your profits would be upwards of 300%. This is including the dividends you would have received.

With all this said, let me make one thing very clear; I am not opposed to adding ETFs to a portfolio. Rather, I believe investors can get better portfolio returns if they are confident enough in making their investment decisions and buying individual companies instead of sticking to indexed investing.

In 2009, stock markets were very uncertain. With companies like GE, there were fears that it may go bankrupt. Buying at that time wouldn’t have … Read More


Investment Expenses: Three Ways to Cut Them

By for Daily Gains Letter | Feb 14, 2014

Investment ExpensesLong-term investing and growing a portfolio over time isn’t an easy task. It requires a lot of planning and a significant amount of research. While doing this, many investors tend to forget one very important aspect: the costs associated with investing in their portfolio—the commissions and fees. If investors control the commissions and fees paid to their brokers and elsewhere, they can save a significant amount of money and have a bigger portfolio in the end.

For those investors who have resolved to invest money in their portfolio in 2014, the following are three ways to add more wealth to your portfolio over the long term.

Use Discount Brokers vs. Conventional Brokers

If an investor opens an account with a discount broker—often referred to as online brokers—they can save a significant amount of money in trading fees compared to a conventional broker, who they have to call to place a trade. Discount broker commissions are much lower than those charged by conventional brokers: a discount broker’s fees can go as low at $5.00 per trade, while a conventional broker’s fees can be 10-times that amount or more.

Consider, for example, that you have an account with a conventional broker who charges a commission of $50.00 per trade, and you make about 30 trades on an annual basis. At that rate, your commission charges will amount to $1,500 per year. With discount brokers, these commissions can be as low as $150.00 a year. With the extra $1,350 you saved by switching to a discount broker, you can invest more capital in your portfolio.

Buy Exchange-Traded Funds (ETFs) vs. Mutual Funds

Holding … Read More


Three Stocks to Profit While Market Struggles with Positive Return

By for Daily Gains Letter | Feb 4, 2014

Three Stocks to ProfitIf January is any indication of the stock market action in 2014, we’re in for a long year. After a scorching year, the key stock indices are ending the first month of 2014 in the red. As we say goodbye to January, it’s worth noting that the S&P 500, after notching up five-percent in the first month of 2013, gave up three percent of its value during the first month of 2014.

The other indices aren’t faring any better. The NYSE posted a 3.8% gain in January 2013, but lost 3.2% of its value in January 2014. The Dow Jones Industrial Average gained six percent in January 2013, but at the close of January 2014, it’s down almost five percent.

But, if you listen to the overly optimistic statisticians, a bad January does not necessarily portend a bad year. Since 1962, in January, the S&P 500 has fallen by more than four percent nine times. But, when that occurs, the S&P 500 is actually up between February and the end of the year—though barely. During those nine years with losing Januarys, the average February–year-end returns tallied 1.08%. (Source: Ratner, J., “A weak January for stocks isn’t as bad as you think,” Financial Post, January 31, 2014.)

Though, there are some statistical anomalies in there that might just be helping the so-called as-goes-January seasonal anomaly, in two of the nine years (1968 and 2009), the S&P 500 reported double-digit gains over the final 11 months of the year. In 1968, the S&P 500 was up 12.1%; in 2009, it was up 35.3%.

In the same time, the S&P 500 saw a … Read More


Your 401(k): How It Can Really Profit from Patience and Conservative Plays

By for Daily Gains Letter | Sep 13, 2013

How It Can Really Profit from Patience and Conservative PlaysYour 401(k) is supposed to be a retirement account with a long investing horizon—not a day trading platform. Unfortunately, there are a growing number of investors doing just that, throwing not just caution to the wind, but also their long-term financial stability.

Way, way back in 1978, Congress enacted the Revenue Act to help encourage Americans to save more for retirement. The Act allows Americans to save for retirement while, at the same time, lowering their state and federal taxes. The term “401(k)” refers to the section number and paragraph in the Internal Revenue Code: section 401, paragraph (k).

The most widely used investment vehicle, your 401(k) is a long-term diversified investment strategy designed to (ideally) minimize risk while helping you realize your retirement goals. With a 401(k), you make money on long-term investing in a diversified portfolio that takes advantage of capital gains growth and compound interest.

As an added incentive, many employers will match your contribution. In 2013, employees can tuck $17,500 away in their account, and those over 50 years old can put away an additional $5,500.

While plunking down a solid portion of every paycheck into your 401(k) may take discipline, you do so because you want to have some sort of safety net when you retire, which is a long-term strategy. Too many investors, however, are tired of the returns they’re seeing with their 401(k)s, especially in light of the major strides the S&P 500 and Dow Jones Industrial Average are making.

In an effort to chase higher returns on their 401(k)s, many investors are now tapping into it for day trading purposes. This is … Read More


Save Money and Profit By Taking Your Portfolio into Your Own Hands

By for Daily Gains Letter | Aug 23, 2013

Save Money and Profit By Taking Your Portfolio into Your Own HandsThe common belief among investors is that you need a significant amount of money to have a portfolio that provides exposure to different asset classes. As a result of this misconception, they may end up taking speculative trades, causing their portfolio to face wild swings.

The fact is that investors don’t really need a lot of money to have a portfolio that’s balanced and exposed to different asset classes. They can do this for a much smaller amount than they think, all thanks to financial innovation in the past few years.

The following are a few means investors can use to make a portfolio that holds different asset classes.

Equities

To get exposure to the stock market, instead of buying individual stocks, investors may look into buying exchange-traded funds (ETFs), like SPDR S&P 500 (NYSEArca/SPY). With this ETF, investors can get exposure to the S&P 500. Buying this ETF is like buying the entire 500 stocks on the S&P 500; when the index goes up one percent, the fund does the same. It also has low costs and can be traded during market hours.

Owning individual stocks can be expensive; investors may incur higher transaction costs. For example, buying 10 different companies in the portfolio would result in 10 transactions. Buying the SPDR S&P 500 ETF, on the other hand, is only one transaction and it gives you exposure to 500 companies. Remember, too, that individual stocks have their own risk.

Commodities

To expose their portfolio to commodities, investors have many different options. One example would be United States Copper (NYSEArca/CPER). This ETF lets investors track the performance of copper … Read More


Our Top Three Defensive Plays for Falling Commodities Prices

By for Daily Gains Letter | Aug 8, 2013

Top Three DefensiveWhile investors with balanced portfolios have enjoyed great returns provided by the key stock indices thus far, those who were heavily focused on commodities and the basic material sector most likely beg to differ. Commodities prices have come down across the board: precious metals like gold and silver have been trending downward, copper prices are edging lower, and agricultural products like corn and soybeans are outright facing selling pressures.

With these happenings comes a question: what should an investor do in situations like these, when the commodities prices are sliding lower?

One action investors might want to take before falling commodities prices take a further toll on their portfolio is to cut their losses and change their allocation, selling what has gone down significantly. Simple math would suggest this: if a stock has fallen 50% in value, it has to increase 100% for an investor to just break even.

If investors continue to be persistent with a belief that commodities prices have a great future ahead, but are witnessing a minor sell-off now, they may want to look at companies that are involved in making, exploring, or doing business with those commodities and have some sort of income attributes to them.

The idea behind this investment strategy is simple: until the commodities prices settle down, companies can provide investors with income in the form of dividends. For example, if a stock price goes down 10%, but over the year it provides a six-percent dividend, then, in essence, their loss is only four percent for the year.

The following are a few ways investors can be exposed to certain commodities and … Read More


All of a Sudden, These “Socially Responsible” Funds Are Going Gangbusters

By for Daily Gains Letter | Jul 9, 2013

How Being Socially Responsible Could Allow You to Reap Big RewardsFor many people, making a profit isn’t the only goal when it comes to investing. Often, ethical concerns can be as important, or even more important, than earnings and dividends. Many investors think we need to be better stewards and be socially responsible for what we invest in.

Socially responsible investing (SRI) is an investment strategy that seeks a financial return from companies deemed socially responsible in regards to both what they produce and how they conduct their business.

By investing in industries like renewable energy, clean water, healthy food, and sustainable living, or in companies that encourage equal opportunity and produce safe and useful products, it is believed investors can make both money and a positive difference in the world around them.

Over the years, ethical investing has evolved from avoiding companies associated with guns, liquor, tobacco, and gambling to being more socially responsible and investing in companies that promote environmental, health, and even political concerns.

Maybe it’s karma, but many of those who have embraced socially responsible investing have seen their portfolios grow substantially over the last four years.

The iShares MSCI USA ESG Select Index (NYSEArca/KLD) is an exchange-traded fund (ETF) that tracks U.S. large- and mid-cap stocks screened for positive environmental, social, governance, and ethical traits.

The fund has total net assets of $207.92 million and an expense ratio of 0.5%. Some of the fund’s 117 holdings include Eaton Corporation plc (NYSE/ETN), NextEra Energy, Inc. (NYSE/NEE), and Marsh & McLennan Companies, Inc. (NYSE/MMC).

The fund is up 11.6% since the beginning of the year, 22.7% over the last 12 months, and 145% since March 2009.

The … Read More


The Stocks You Need to Know About Now to Protect Your Retirement

By for Daily Gains Letter | Jun 27, 2013

retirement savingsThe dream of retiring comfortably is a mirage for the vast majority of Americans. According to the National Institute on Retirement Security (NIRS), the retirement savings shortfall in the U.S. is worse than anyone thought. But it’s not an impossible dream for wise investors.

After the U.S. markets crashed in 2008, many Americans saw the value of their hard-earned nest egg evaporate. While the S&P 500 and Dow Jones Industrial Average have been on a five-year bull run, this hasn’t trickled down to the average American. In fact, unemployment remains high, a record number of Americans receive food stamps, wages are stagnant, and personal debt is up.

All of that makes it difficult to set aside money to save for retirement.

And we are now bearing witness to the number of Americans who are sorely unprepared for retirement. In fact, the NIRS study found that roughly 45%, or 38 million, working-age households do not have any retirement account assets. (Source: “The Retirement Savings Crisis: Is It Worse Than We Think?,” National Institute of Retirement Security web site, June 2013.)

More specifically, when all working-age families are accounted for, the typical family has just $3,000 saved for retirement. Those nearing retirement don’t fare much better, with only $12,000 in the bank.

On top of that, 80% of working families have retirement savings less than one times their annual income. As a result, the U.S. retirement savings deficit has ballooned to between $6.8 and $14.0 trillion.

Even at the best of times it can be difficult to plan for retirement. After two recessions (2001 and 2008), even the most optimistic can give … Read More


Two Ways to Protect Yourself from America’s Deteriorating Economic Divide

By for Daily Gains Letter | Jun 7, 2013

Two Ways to Protect Yourself from America’s Deteriorating Economic DivideAs I’ve been noting in this column since the beginning of the year, there is a major economic disconnect between what is happening on Wall Street and what is happening on Main Street. Eventually, the great divide will come into focus and the U.S. economy will react accordingly.

The evidence: if the stock market is a leading indicator of economic health, then the U.S. is running full steam ahead. The current bull market is now in its fifth year. The S&P 500 is up more than 18% since December 31, 2012 and the Dow Jones Industrial Average is up almost 20% since the end of 2012; both are trading near record highs.

If the life of the average American is the litmus test for America’s economic health, then things are not as rosy as they would appear. U.S. unemployment remains high at 7.5%; median income levels are down 8.1% from their 2007 levels; the number of Americans relying on food stamps has soared 80% to 47.5 million (or 23 million households) since 2007; wages are stagnant; and 40% of Americans have at least one credit card with a balance of close to $15,800.

This economic reality is being reflected in the 2013 first-quarter and second-quarter financial results. During the first quarter of 2013, 78% of the so-called red-hot S&P 500 companies issued negative earnings-per-share (EPS) guidance. For the second quarter, almost 80% of S&P 500 companies have issued a negative outlook.

Sure, the S&P 500 may be reporting strong returns, but it’s not because of an economic recovery. The current bull market has more to do with the Federal Reserve’s … Read More


Simple Concept Can Grow Your Portfolio Exponentially

By for Daily Gains Letter | May 30, 2013

Simple Concept Can Grow Your Portfolio ExponentiallySeeing speculative bets work out as expected is the best thing an investor can get—but sometimes, this is not the case. It’s mentioned in these pages over and over again: when an investor takes short-term speculative trades, they are exposing their portfolio to a significant amount of risk, which can be dangerous for those who are close to retirement or are saving for it.

Those who are involved in the world of investing for the long term should do just that—focus on the long term and use time to their advantage. Staying in the markets can be painful to some due to the noise and volatility on a short-term basis, but the gains on an investor’s portfolio can be phenomenal over the long haul.

With the help of one investing concept and solid growth companies in their portfolio, investors can save up a significant amount of money for the time when they need it, be it retirement, travel, or their child’s education. Investors who want to invest for the long term should equip their investing knowledge with the concept of “compound interest,” which Albert Einstein called “the most powerful force in the universe.” (Source: “Albert Einstein Quotes,” ThinkExist.com, last accessed May 28, 2013.)

Simply stated, compound interest is when an investor earns money over what he or she has already accumulated. This concept may sound a little confusing at first, but it can make a portfolio grow exponentially over time.

To make the concept clear, consider this scenario:

Say, for example, you have $10,000, and you put this amount into a savings account that pays you two percent interest per … Read More


How Barbecue Charcoal Reveals the Truth About the U.S. Economy

By for Daily Gains Letter | May 6, 2013

Barbecue Charcoal Reveals the TruthIn a rare miss for a consumer products business, The Clorox Company (NYSE/CLX) disappointed the stock market by reporting very flat first-quarter numbers.

It’s more evidence that real economic growth continues to be elusive.

The Clorox Company is a really good business.

It’s way more than “Clorox Bleach:” it’s also “Pine-Sol,” “Liquid-Plumr,” “S.O.S.,” “Glad,” “Burt’s Bees,” “Brita,” and “Kingsford,” to name a few.

According to the company, it could only generate a one-percent gain in sales, to $1.41 billion.

Diluted earnings per share from continuing operations fell two percent from the comparable quarter.

The company’s domestic U.S. business was stronger than international operations. One sore spot for the company was its “Kingsford” charcoal brand, because of the weather; a stronger winter kept charcoal consumers indoors.

There’s also been a strong movement towards more environmentally friendly cleaning products. Plenty of consumer product brands purport to be “green,” and they line the store shelves at many retailers.

Noticeable in the company’s earnings report was a significant increase in cash and equivalents. This is a trend that is prevalent throughout the entire stock market.

Clorox’s 10-year stock chart is below:

clx clorox co nyse

Chart courtesy of www.StockCharts.com

The company’s long-term stock market performance has been excellent.

Clorox announced third-quarter earnings of $134 million, or $1.00 diluted earnings per share. This compares with $134 million, or $1.02 diluted earnings per share, in the same quarter last year.

Like many consumer goods companies, Clorox recently soared on the stock market. While it should be considered fully valued considering its flat earnings, Clorox is still offering a three-percent dividend yield. This is what has kept institutional investors in the … Read More


Three Strong Cyclical Stocks Waiting for More Optimism

By for Daily Gains Letter | May 6, 2013

Strong Cyclical StocksInvestors are always advised to have a diversified portfolio: stocks, bonds, cash, value stocks, and growth stocks. It’s also a great idea to have a good mix of cyclical and non-cyclical stocks.

When the economy is expected to perform poorly, or already is, investors tend to shy away from cyclical stocks and flock to non-cyclical or defensive stocks. Defensive stocks, like those found in the consumer staples, healthcare, and utility sectors, can give your retirement portfolio a much-needed income cushion.

Regardless of what the economy is doing, people will still pay to have clean hair, access warm water, get rid of headaches, drink, smoke, and have fresh breath.

That’s why investors like to make room for defensive plays like Johnson & Johnson (NYSE/JNJ), Altria Group, Inc. (NYSE/MO), Consolidated Edison, Inc. (NYSE/ED), and Merck & Co., Inc. (NYSE/MRK).

Not surprisingly, defensive stocks have been the best-performing sector on the S&P 500 this year. Defensive stocks are, on average, up 18% in 2013, easily outpacing technology, industrial, energy, discretionary, and financial stocks.

This should be a little surprising when you consider that the talking heads on Wall Street remind us daily that the U.S. economy is doing really, really well! The Dow Jones Industrial Average and S&P 500 may be in record territory, but that doesn’t mean individual investors have a lot of faith in what they see.

What it could signal is that investors do not have faith in the economy and fixed-income equities, and instead are looking to park their money in financially solid companies that pay out regular dividends.

That is a convincing argument.

At the same time, if … Read More


Why Corporations Are Ducking New Investment in the U.S. Economy

By for Daily Gains Letter | May 3, 2013

New Investment in the US EconomyIf there is good news to be had, it is that corporations are increasing their dividends.

The unprecedented amounts of cash floating through the economic system have fostered an unfortunate environment in which corporations don’t need to make substantial new investments in their operations.

While this creates a more positive environment for investors, Main Street is left out, twisting in the wind.

Among the many blue-chip corporations that recently announced substantial increases to their dividends, there are three stocks worth taking a look at:

1. PepsiCo, Inc. (NYSE/PEP)

PepsiCo is an unbelievably good business and a very good stock market holding if you’re a long-term investor.

The company’s first-quarter earnings results were excellent, and it was very evident that an increase in dividends was going to happen, because the company’s cash balances soared.

PepsiCo announced an increase of six percent in its annual dividends to $2.27, from $2.15 per share. This is the company’s 41st consecutive annual dividend increase.

2. Costco Wholesale Corporation (NASDAQ/COST)

Costco is a super cash machine.

On the stock market, the position has doubled over the last three years, which is impressive for such a large, mature, and low-margin business.

This corporation is consistently increasing its dividends.

Company management recently announced a quarterly dividend increase from $0.275 to $0.31 a share, or from $1.10 to $1.24 per share on an annualized basis, for a 12.7% gain.

3. International Business Machines Corporation (NYSE/IBM)

This technology bellwether reported first-quarter earnings just shy of expectations. Still, investors continue to buy this stock because the business is solid and the company is increasing its dividends.

International Business Machines (IBM) raised … Read More


Two Reasons Why Dividend Stocks Have Room to Run

By for Daily Gains Letter | May 3, 2013

Dividend Stocks Have Room to RunThanks to artificially low interest rates, the Federal Reserve has taken the “income” out of “fixed income,” and made saving for retirement that much harder for the average American.

Back in the 1980s, the interest rate on a 10-year Treasury was above 15%. Investors planning for retirement could rely on their fixed incomes providing them with solid, reliable profits; they knew what their annual returns would be, and could budget and spend accordingly.

Today, the 10-year Treasury interest rate is less than two percent. That’s not much for the average American to bank on when it comes to retirement investing. In fact, low interest rates have essentially eliminated the chance for Americans to earn a decent income from fixed equities.

In an effort to eke out as much income as possible from their retirement portfolios, investors are turning their attention to high-yield investment stocks. On one level, it makes total sense—replacing one income-generating investment vehicle with another. At the same time, it’s important to remember that dividend stocks are still stocks—and a lot riskier than fixed-income investments.

The current challenge, some contend, is that income-starved investors have elevated dividend stocks to unsustainable levels. Once interest rates begin to rise, investors will pour out of dividend stocks and into the safety of government equities, at which point, dividend-yielding stocks—and their once reliable income—will tumble.

While it is true that dividend-yielding stocks are more popular than ever before, that does not mean they will fall out of favor once the economy rebounds.

Companies are sitting on cash. You need cash to pay out dividends, and companies have been hoarding cash. According to … Read More


Three Reasons Why Institutions Are Buying Stocks and Why Investors Need to Be Extremely Cautious

By for Daily Gains Letter | May 1, 2013

Investors Need to Be Extremely CautiousVery soon, the stock market will be overbought. It’s time to be extremely cautious.

Even in the face of mixed earnings and economic news, institutional investors keep buying this market. And while fundamentals don’t particularly support a rising stock market, there are a number of reasons why institutions have to buy. Here are just three of the reasons:

1. They Have the Money

There is a tremendous amount of cash sitting on the sidelines. Both individual and institutional investors have been very frazzled over the last few years, and corporations have, as well.

Earnings results from large mutual funds and investment corporations recently revealed billions of dollars of new cash inflows allocated to equities. That money has to be put to work, because that’s what customers are paying for.

2. There Is Nowhere Else to Go

Because interest rates are so artificially low, there is no other asset class, other than real estate, where investors can allocate their capital and expect to get a return that is greater than the rate of inflation.

Even if the stock market doesn’t do anything and corporations don’t show any growth in earnings, dividend payments and share buybacks are very well assured.

Institutional investors need to invest in this stock market, because bonds, currencies, and commodities no longer offer the right combination of income, safety, and prospective capital gains. This is why so many blue chips have been outperforming—they offer what the rest of the world does not.

3. They Have to Keep Up with the Joneses

Without a doubt, a herd mentality exists on Wall Street. Investment companies have been chasing the safest … Read More


Mountains of Cash Growing; Will Corporations Stop Hoarding and Pay Out?

By for Daily Gains Letter | Apr 12, 2013

120413_DL_clark

Corporations, like investors everywhere, are very reticent about current business conditions. They have been this way for years. And they have way too much cash, which is why dividends have been increasing.

The financial crisis really was the catalyst for a huge change in the way corporations allocate their capital. Corporations hunkered down on costs and became extremely tight with their money.

It is highly likely that large corporations will increase their dividends this earnings season. Of course, this will be great news for those investors who seek out dividends from blue chips.

This market is at a high, but it is fairly valued and has a lot of potential to increase further—if corporations can produce growth and there is no major new shock from an event, like a currency default in Europe, for example.

There is still tremendous reticence on the part of corporations to invest in new business operations, new plant and equipment, and new full-time employees. And while this is not a positive for the Main Street economy, it is a positive for shareholders collecting dividends.

Corporations are sitting on a mountain of cash. In many of the earnings results so far, large corporations are reporting too much free cash flow. And they need to do something with all this money, because cash does not earn a rate of return greater than the rate of inflation.

One of the easiest ways to do this is to return the money in the form of dividends to stockholders. I still firmly believe that blue chip investing will do well over the long term.

There may be some spectacular downside … Read More


Three Smaller Firms with Reliable Dividends

By for Daily Gains Letter | Apr 4, 2013

040413_DL_whitefoot

Just because the S&P 500 and Dow Jones Industrial Average are in record territory, that doesn’t mean the overall stock market is worth looking at. At the same time, it would be a mistake for investors to consider reducing their positions in equities in favor of cash or bonds, Treasuries, and certificates of deposit (CDs).

Banks provide interest rates barely above zero percent; bonds are near three percent, and jumbo five-year CDs yield returns of just 1.5%. In a nutshell, investors looking to buy bonds are basically saying they are happy locking their hard-earned dollar into negative inflation-adjusted returns. They’re okay using an investment vehicle that loses money.

In light of the ill-begotten euphoria on Wall Street, investors looking to increase their retirement fund nest egg just need to be more discerning when looking at stocks. It would be a mistake to think that big stocks are the only place to make solid profits. At the same time, it’s important to remember that investors cannot earn income without taking some risk.

Right now, there is an increasing number of fundamentally and technically strong smaller companies offering regular, high dividend payouts that trump the paltry interest rates offered through other investing channels.

In the past, dividend-hungry investors had to turn to big banks and utilities. But now, regular payouts are being offered by smaller companies in less conventional sectors.

The joy with some smaller companies is that they tend to outperform their larger peers during an economic recovery. And because smaller companies can experience faster growth, patient investors get paid to wait for both capital gains and a dividend yield.

On … Read More


Investing in Gold: ETFs or Individual Stocks?

By for Daily Gains Letter | Apr 1, 2013

010413_DL_clark

Lots of investors believe investing in gold as an investment theme is a good idea. But I would bet that a lot of those investors don’t have any exposure to the commodity.

The track record of gold prices is self-evident, but it is a market that is controlled by speculators. Even if you think spot gold should be at $2,000 an ounce, it certainly could drop to $1,250 an ounce if futures traders wish it to.

So investing in gold comes down to just one thing—the amount of risk and exposure you are willing to have in your portfolio.

Gold stocks have certainly been hit hard in recent months. The whole sector has suffered from rising costs and a weakening spot price. One of the things that could be holding a lot of investors back from investing in gold is the fact that so few gold stocks pay dividends.

Barrick Gold Corporation (NYSE/ABX;TSX/ABX)) is currently yielding around 2.7% on the stock market. But the company is still a huge risk; it’s been going down on the stock market for ages now, and who knows where it will end up? Barrick’s stock chart is featured below:

04012013_dailygains1
Chart courtesy of www.StockCharts.com

Those in retirement aren’t likely to be interested in junior gold mining stocks. A collection of gold coins, however, might be stashed away in the dresser drawer.

Investing in gold or any commodity that trades on the futures market has always been a high-risk endeavor. The prevalence of gold exchange-traded funds (ETFs) certainly has made it a lot easier for investors to express an investment view regarding the commodity. And today, … Read More


Avoid the Eurozone Mess: How to Profit Domestically

By for Daily Gains Letter | Mar 28, 2013

280313_DL_clarkMost 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:

dl_03282013_image001Stock 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 for Daily Gains Letter | Mar 27, 2013

270313_DL_clarkThere 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:

dl_0327_image001Chart 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


Wal-Mart Stock Breaks 12-Year Consolidation; Why the Retail Sector Is Looking Up

By for Daily Gains Letter | Mar 21, 2013

210313_DL_clarkThere is a resilience to this stock market, and regardless of the reason, it’s a play by institutional investors that first-quarter earnings season will be decent, as well as further earnings growth later this year.

While it’s tough to think about with the stock market at its highs, this market could go a lot higher yet, based on continuing stimulus from the Federal Reserve and a slight improvement in business conditions.

One of the best things available from the massive cash balances that large corporations have accumulated is increasing dividends. The stock market saw a lot of new dividend announcements last year, partially because of tax changes but also because companies can afford it.

This is a trend that is going to continue this year, and it’s good news for blue chip investors who are saving for retirement.

There are a lot of attractive blue chips that are growing their earnings and are not expensively priced in this stock market. Wal-Mart Stores, Inc. (NYSE/WMT) is five points below its recent high; it has a current dividend yield of 2.6% and a price-to-earnings (P/E) ratio of about 14.5. Wal-Mart’s longer-term stock chart is featured below:

dl_0321_image001Chart courtesy of www.StockCharts.com

Wal-Mart has been trading sideways for years, and its recent stock market breakout is meaningful. Again, Wal-Mart is not expensively priced, and Wall Street continues to nudge the company’s 2013 earnings estimates higher.

This upcoming earnings season is make or break for the stock market. Most corporations were coy with their forecasts last quarter, but they do this on purpose so as to show outperformance. But even with these conservative forecasts, most … Read More


Agriculture; the Next Black Gold?

By for Daily Gains Letter | Mar 20, 2013

200313_DL_clarkWhen the stock market experiences its next major pullback, it should be an attractive entry point to consider select large-caps that pay dividends. On the cusp of another earnings season, most large U.S. corporations are in excellent financial health.

There are a number of investment themes playing out in the current business cycle. When gold prices were lofty, stocks like Caterpillar Inc. (NYSE/CAT) and Joy Global Inc. (NYSE/JOY) were really doing well.

Stock markets in China, the world’s second-largest economy, have been drifting for several years, but emerging markets, like the Philippines and Malaysia, are growing like mad. And Japan’s stock market recently turned significantly higher. Many Japanese companies are expecting strong revenue gains this year on the back of a weaker yen.

The ebb and flow of the global business cycle is always changing; and with inflation creeping into the U.S. economy, the next big play will be in real assets, as the commodity price cycle makes its final migration into the agriculture sector.

Deere & Company (NYSE/DE) has the biggest market share of any large equipment manufacturer related to agriculture in the U.S. Currently, the stock is not expensively priced, with a price-to-earnings (P/E) ratio around 11.5. Deere’s stock chart is featured below:

dl_0320_image001Chart courtesy of www.StockCharts.com

On the stock market, Deere has proven to be cyclical and a very good long-term wealth creator for shareholders. Since 1963, the company has split its stock two-for-one on four occasions, the last one being in November 2007. Deere also split its stock three-for-one in November 2005, and the company has been increasing its annual dividends consistently for the last 10 … Read More


Retirees Tired of “Slow and Steady” Income Need to Check This Easy Strategy Out

By for Daily Gains Letter | Mar 15, 2013

150313_DL_whitefootRetirement planning doesn’t end once you retire. It just moves into a different phase. One of the safest paths to building wealth for those already in retirement is through big blue-chip stocks that provide consistent quarterly dividends.

Slow and steady isn’t good enough for some investors, though. Some retirees need to build wealth more quickly. A recent report shows that Americans’ confidence in their ability to retire comfortably is at historic lows.

Just 14% of Americans say they are “very confident” they will have enough money to live comfortably when they retire, while 23% say they are “not at all” confident. Almost 60% of middle-class retirees will likely run out of money if they maintain their pre-retirement lifestyle and don’t cut spending by at least 24%. (Source: Helman, R., et al., “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings,” Employee Benefit Research Institute web site, March 2012, last accessed March 14, 2013.)

In fact, the fear of outliving retirement income is actually greater than the fear of dying. An astounding 61% of baby boomers fear outliving their money in retirement more than death. (Source: “Outliving Your Money Feared More Than Death: Allianz Life Study Reveals Boomers Guessing at Retirement Needs,” Allianz Life Insurance Company of North America web site, June 17, 2010, last accessed March 14, 2013.)

Those already enjoying their golden years, unhappy with the measly returns that bonds, Treasuries, certificates of deposit (CDs), and banks are providing and impatient with the small gains made on blue-chip stocks, may want to consider one of the more lucrative areas for investing—small-cap dividend stocks.

When it … Read More


Breakout in Transportation Stocks Gains Strength—How to Play the Disconnect

By for Daily Gains Letter | Mar 13, 2013

130313_DL_clarkThe Dow Jones Transportation Average experienced a powerful breakout this past December. And it’s been a stealth rally ever since, with an expansion in valuations, not earnings.

The stock market’s strongest sector over the past few months has been transportation stocks, which have been much stronger than technology stocks or the S&P 500 companies. Even though it doesn’t seem real, leadership in the Dow Jones Transportation Average is a classic stock market sign.

Helping the cause are lower oil prices. Countless names among large-cap transportation stocks are soaring. And at new 52-week highs, they still aren’t expensively priced on the stock market, which means they can go higher.

The stock market likes betting on the future. Institutional investors are not fighting the Federal Reserve; they are buying in anticipation of first-quarter earnings season. Fourth-quarter earnings season wasn’t that bad for corporations, but for individuals, it’s another story. This is why the stock market and the Dow Jones Transportation Average can still tick higher—valuations and oil prices. The stock chart for the index is featured below:

dl_031313-image001Chart courtesy of www.StockCharts.com

The stock market will use first-quarter earnings season as its new catalyst for action. My expectation is that we’re in for a meaningful correction, even if first-quarter numbers are decent.

There is a real disconnect in the U.S. economy between the stock market and the Main Street economy. Corporations have all the money, and any modest uptick in economic activity will amplify the bottom line. Corporations, being lean and mean with dividends and share buybacks, are way better than individual incomes.

This is a very difficult market to play. Risk for … Read More


The Only Thing You Can Bank on Near-Term

By for Daily Gains Letter | Mar 11, 2013

110313_DL_clarkThe stock market is absolutely where it should be, given current earnings—and it’s across the board; from large-cap to small-cap, valuations are fair. But the real telltale sign will be first-quarter earnings season. The stock market wants to see growth, and it actually doesn’t need much of it in terms of the bottom line. This market wants to see revenue growth or stocks will go into correction.

Corporations, especially large ones, have done an exceedingly good job of maintaining their earnings through the last recession and the modest economic recovery. They’ve done this through diligently controlling costs, doing little in the way of new hiring, ensuring productivity gains per existing worker, and using technology. The health of U.S. corporations is very good; for individuals, it’s a whole other story.

Corporations have also been very conservative with their earnings outlooks, making it easier to outperform or beat the Street. With the large cash hoards that corporations have been built up by not investing in this economy, companies are keeping investors happy with increased dividends, even with the prospect of no earnings growth.

This stock market is due for a correction; but it’s still unclear whether there will be decent buying opportunities when this correction occurs. If this upcoming earnings season disappoints, then new buyers will be better off holding out for future weakness.

The S&P 500 has to show more breakout strength in order for the rest of the stock market to follow. We need technology stocks to further accelerate, along with the industrials. But in reality, what the stock market is doing now is really more of an expansion in … Read More


Why Bonds and Treasuries Are the Worst Places to Park Your Retirement Fund

By for Daily Gains Letter | Mar 8, 2013

DL_Mar_8_2013_JohnWith the bull market celebrating its fifth anniversary and the Dow Jones Industrial Average reaching record levels (and erasing losses from the financial crisis), it’s not a surprise to see some investors questioning whether or not they’ve missed the boat.

For those who think they missed the recovery, it’s probably a little unnerving to consider the present market a bull market. While the markets may be performing well, the average American isn’t. Unemployment remains high, as does household debt. Gross domestic product (GDP) is essentially flat. And housing remains fragile.

Those that think they have missed out or don’t want to risk jumping back in at this late stage will have to be content with what they’re getting from the banks (0.5%) or with bonds (3.1%). Neither one is worth celebrating.

How did we get here?

In an effort to stem the economic slide of the U.S. housing collapse that first surfaced in 2005, the Federal Reserve unveiled three different rounds of quantitative easing (QE). Since 2008, the Federal Reserve has printed off trillions of dollars, and it continues to add to that number at a staggering rate each month.

But America isn’t alone. Central banks from around the world are flooding the markets with QE.

The extra dollars pumped into the economy are supposed to spur growth. But they also have the reverse effect, shrinking the buying power of each dollar, which is the driving force of inflation. While inflation is good for businesses and Wall Street, it’s bad news for interest rates and everyday Americans and their retirement funds.

If investors aren’t willing to take some of their … Read More


The Final Countdown: The Stock Market’s on Its Final Leg to Recovery

By for Daily Gains Letter | Mar 7, 2013

070313_DL_clarkSkepticism is very high among individual investors. Institutional investors who run buy-and-hold mutual funds don’t need to be as worried; they get paid to buy stocks. The stock market’s run makes total sense in that the Federal Reserve continues to promise low interest rates and continues to increase the money supply, while revenues and earnings from corporations are growing modestly.

Other than real estate, there is no other place for an investor to put his or her money to generate income above the inflation rate. So the stock market is likely to keep ticking higher over the near-term. Now, all the power is with corporations.

I believe we’re on the final leg of the bull market recovery from the March 2009 low. All investors want to see is revenue growth and they will keep buying stocks. Growth is the name of the game as corporations have actually done a great job keeping a lid on costs. I expect more new announcements regarding share buybacks and rising dividends this upcoming earnings season.

The toughest problem facing the Main Street economy is employment conditions. But even though the Federal Reserve has catered an extravagant menu of stimulus to Wall Street and corporations, large companies just don’t want to invest in new plant, equipment, or employees. The cash hoarding will continue; the beneficiaries are stock market investors, not workers.

In the final leg of this stock market recovery, there are some attractive buys out there. One particular investment theme that I believe in is that corporations will begin to open their wallets, but the cash won’t be spent on new employees; it will … Read More


Dow Hits Record High; Is There Still Value in Small-Caps?

By for Daily Gains Letter | Mar 7, 2013

070313_DL_whitefootDuring the financial crisis, millions of American investors pulled their money out of the stock market and funneled their retirement funds into low-yield, low-risk Treasuries, even into the bank. Unfortunately, with most banks dolling out just 0.5% interest and 30-year Treasuries offering just 3.1%, investors hoping to maintain a comfortable life in retirement are going to have to find better places to park their retirement funds.

With the Dow Jones Industrial Average sailing into uncharted territory, many investors that were sitting on the sidelines are turning their attention back to the stock market. And for good reason.

On March 6, 2009, the Dow Jones Industrial Average touched a low of 6,469.95; on March 6, 2013, it hit an all-time high of 14,320.68—for a four-year gain of 121.3%. During the same period of time, the S&P 500 climbed 121.9%. (Source: StockCharts.com, last accessed March 6, 2013.)

After lying dormant for years in banks and low-yielding bonds, some small investors are thinking about bringing their money off the sidelines and back into stocks. With the Dow reaching record heights, is it really the best time for investors to be jumping back in?

Yes, but with some qualifications.

Historical wisdom holds that small-cap stocks outpace large-cap stocks. As a result, some investors may be considering jumping on the small-cap bandwagon. And why not? Since touching a low of 355.05 on March 9, 2009, the Russell 2000 index, a measure of small-cap stocks, has climbed 165.5%—hitting a record 932.00 on February 19, 2013. (Source: Ibid.)

While the Russell 2000 has solidly outperformed the Dow Jones since 2009, investors have to consider whether the bull … Read More


This Stock Market Can Go Higher

By for Daily Gains Letter | Mar 4, 2013

040313_DL_clarkCorporate earnings are still pouring in, largely from smaller companies that take longer to put their financial results together. The numbers continue to be generally good, and if there is a trend, it’s that earnings are beating consensus, but revenues are coming in just slightly short. For the most part, companies are confirming existing earnings guidance for 2013.

In terms of portfolio strategy, I’m still very hesitant about buying this stock market. We’re at five-year highs and general economic conditions are still pretty slow. But there’s one thing I’m not and that’s bearish. The stock market is appropriately valued, considering current earnings and forecasts for a great number of blue chips are for high single-digit growth in revenues and earnings for 2013. Combined with dividends, this should produce another decent year.

While stock market investment risk is high, a lot of risks in global capital markets are actually priced into the stock market, bonds, and currencies. The sovereign debt crisis and economic weakness in the eurozone is still very pronounced, but the market knows this. U.S. fiscal problems and the inability of policymakers to deal with them decisively are priced into this market. Investors are looking beyond the previous trading catalysts and are now focusing (finally) on what corporations are saying about their businesses. Revenues and earnings are now the big catalyst.

The key, leading index for the stock market remains to be the Dow Jones Transportation Average. Its breakout late last year led the broader market to a new upward trend, and many component stocks within the index are doing great. And corporate earnings from this group came in … Read More


A Super-Stock You Can Bank On?

By for Daily Gains Letter | Mar 1, 2013

010313_DL_clarkThe best companies have a tendency to remain just that—the best. But it is true that a business cycle exists, and this is the case for individual corporations economy-wide. As a stock market investor, many corporations have proven historically to be attractive buys when their share prices retreat. And that’s the key—getting the business cycle correct and investing in those corporations that are market leaders, even during recessions.

If you are saving for retirement or are retired and living on a fixed income, dividend income from the stock market likely plays a role in your life. Because interest rates are so artificially low right now, countless retirees have to have exposure to the stock market, even if they would prefer not to. The fact of the matter is that you can’t beat the rate of inflation with today’s interest rates. Nowadays, we have to get dividend income from corporations, which is a riskier investment strategy.

One of many blue chip corporations that are doing very well in this economy is 3M Company (NYSE/MMM). How do you describe this diversified company that makes tape, coatings, medical supplies, cleaning products, and electronic equipment? Well, it’s a company with a lot of interests, and in spite of what you hear in the news, business is pretty darn good. The company’s long-term stock chart is featured below:

dl_0301_image001Chart courtesy of www.StockCharts.com

Even among large-cap, blue chip corporations, 3M’s long-term track record on the stock market is outstanding. The stock has proven that it is worth buying when it’s down, which according to its chart, isn’t usually for long.

For any stock market portfolio, consistency … Read More


Great Dividend Stock Could Be Ready for Breakout

By for Daily Gains Letter | Feb 27, 2013

270213_DL_clarkThere 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.

dl_0227_image001

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


Semiconductor Play for Portfolio Growth, Diversification, and Income

By for Daily Gains Letter | Feb 27, 2013

270213_DL_zulfiqarWhen you are building a portfolio and saving for retirement, a financial planner usually suggests that you diversify as much as you can—to protect your capital and reduce your risk. The last thing investors want when they are saving for retirement is to lose what they have.

When you diversify, your risk decreases. Even if you are investing in the same industry, investing in different companies reduces your risk significantly.

One way to do this is to look for companies that are operating in multiple regions and industries. Why? This is simple: if one country is witnessing economic slowdown, the other country might be performing well. The same goes for industries—some industries might excel at times of economic growth, and others might suffer.

STMicroelectronics N.V. (NYSE/STM) is a perfect example of this kind of company—well diversified in different regions around the world and in multiple industries. This company is based in Switzerland, and it has research and development centers in 10 countries, 12 manufacturing sites, and global exposure with sales offices around the world. (Source: STMicroelectronics N.V. web site, last accessed February 25, 2013.)

STMicroelectronics N.V. (STM) is one of the largest semiconductor companies and has products for different industries. The company is a leader in serving integrated device manufacturers (IDM) with products, including microcontrollers, smartcard products, standard commodity components, micro-electro-mechanical systems and advanced analog products, application-specific integrated circuits, and application-specific standard products for analog, digital, and mixed-signal applications. STM also offers subsystems and modules for the telecommunications, automotive, and industrial markets, comprising mobile phone accessories, battery chargers, ISDN power supplies, and in-vehicle equipment for electronic toll payment. (Source: Yahoo! … Read More


What Rising Dividends Are Telling You About the Market

By for Daily Gains Letter | Feb 26, 2013

260213_DL_clarkThere’s a very good trend developing this year, and it’s benefiting the stock market and income investors. Dividends are going up, and not just with the usual suspects, like the big brand-name companies. Dividends are rising among smaller companies, and it’s a great sign of improving business conditions.

Right now, the stock market is highly uncertain about its future, and rightly so. Musings from the Federal Reserve’s last meeting showed the same sentiment. I don’t see Ben Bernanke suddenly withdrawing massive amounts of monetary stimulus, as he’s always been Wall Street’s biggest booster. Besides, interest rates are too artificially low and the Fed continues to increase the “M2” money supply (the amount of money in circulation, plus savings deposits, balances in money market mutual funds, and deposits) at a substantial pace. The Fed loves the stock market too much to quit.

What’s most important for your investment decisions going forward is what corporations report about their businesses. The numbers and corporate outlooks say it all. And the increased dividends we’re getting are a vote of confidence from corporations, which for the most part, are the strongest and healthiest participants in this economy.

One smaller company that just reported solid financial results and an increase in its quarterly dividends is McGrath RentCorp (NASDAQ/MGRC). This interesting company sells and rents modular buildings and containers to all kinds of customers in different industries. The company’s stock chart is below:

 

dl_0226_001Chart courtesy of www.StockCharts.com

 

In the fourth quarter of 2012, the company reported that its total sales grew 20% to $102 million. Earnings were down slightly to $11.9 million from $13.2 million … Read More


Why You Don’t Need to Worry About the Sky Falling on the Stock Market

By for Daily Gains Letter | Feb 25, 2013

250213_DL_clarkThere’s no need to worry about the stock market’s gyrations after the Federal Reserve said it was time to start thinking about ending quantitative easing. No other Federal Reserve in history has been more willing to accommodate Wall Street, so help through monetary policy won’t be going away anytime soon.

The stock market is appropriately valued, given current earnings, and it’s bouncing around its five-year highs on low trading volume, due to the uncertainty of economic growth going forward. In my opinion, the key is to lend less weight to the overall stock market and more to what corporations are saying about their businesses. While there is quite a bit of disparity among corporations and industries, 2012 fourth-quarter earnings season was generally good.

A lot of large-cap, dividend paying corporations said that they expect high single-digit growth this year, which including dividends, should result in another solid, low double-digit rate of return for investors. Adding to the story is the fact that corporations are not expensively priced on the stock market. In fact, many are trading quite a bit below their historical valuations.

So, while investment risk is high and trading volume on the stock market is low, the outlook from corporations is pretty much the same.

Consider The Procter & Gamble Company (NYSE/PG), for example. Procter & Gamble is one of several blue chip corporations in the consumer products industry. In its latest quarter, ended December 31, 2012, the company increased its core earnings per share by 12% to $1.22. The company also raised its 2013 fiscal year earnings guidance and increased its share buyback program. The company’s stock … Read More


Dividend Paying Stocks with Big Capital Gains

By for Daily Gains Letter | Feb 22, 2013

220213_DL_clarkThe strength we’ve seen in the stock market over the last several years has been a boon to large-cap dividend paying stocks. An investor no longer needs to take the high investment risk of speculating on micro-cap companies; big-cap companies are moving just as fast and furious on good news.

Most investors with a stock market portfolio typically have a mix of holdings that would include individual stocks, mutual funds, and perhaps some exchange-traded funds (ETFs). For individual stocks, it definitely pays to be diversified, not only among industry groups but among the market capitalization of companies as well. A handful of large-cap dividend paying stocks can go a long way toward normalizing your investment returns over time.

Among the dividend paying stocks that I like, Johnson & Johnson (NYSE/JNJ) takes the cake in terms of stability, consistency, and earnings growth. I think a well-balanced stock market portfolio should have a pharmaceutical company as a component. Pharmaceuticals are such a large part of the economy now, and pharmaceutical companies are very good at making money for shareholders. Johnson & Johnson’s long-term stock chart is below:

 

dg_02222013image001Chart courtesy of www.StockCharts.com

This company has been very consistent in terms of its earnings growth over the years, and among dividend paying stocks, it’s been one of the best. It is true that large-cap companies can experience long periods of no capital gains; but then again, that’s what the quarterly dividends are for.

And what a company like Johnson & Johnson represents in a portfolio isn’t just about capital gains. It’s a benchmark holding that grows its earnings and dividends over time, providing … Read More


One Utility Stock That Beats the Market Consistently

By for Daily Gains Letter | Feb 21, 2013

210213_DL_clarkIn the stock market, you can do well as a conservative, blue chip investor. You don’t need to speculate in gold, oil, or technology to generate good rates of return. As always, the keys to successful stock market investments are good timing and owning a business that’s growing its earnings.

A lot of conservative investors who are saving or are already in retirement buy utility stocks because of the consistency of their earnings growth and their typically higher dividends. Especially for those investors looking for income, the higher dividends associated with utility stocks are attractive.

One utility with a great long-term track record on the stock market is The Southern Company (NYSE/SO), which is based in Atlanta and operates a number of different plants that generate electricity. The company boasts a great track record of increasing earnings and dividend payments to shareholders; and on the stock market, it has performed more like a growing technology stock. The company’s long-term chart is below:

dg_chart_1
Chart courtesy of www.StockCharts.com

Of course, the real wealth creation from Southern for investors has come from its increasing dividends, which have been going up consistently. The company’s earnings growth is also relatively consistent; as you might have noticed on the stock chart above, the company has performed considerably better than you might expect from a utility stock.

Owning the right business that’s growing its earnings is key to wealth creation on the stock market. I would argue that a utility like Southern Company is worth considering when it’s down in value. The company has an excellent dividend reinvestment plan (DRIP).

During the 1990s, utilities were shunned by … Read More


A High Dividend Yield Investment You Can Take to the Bank

By for Daily Gains Letter | Feb 15, 2013

DL_Feb_15_2013_JohnA retirement portfolio is more than just a group of stocks. It’s a collection of investments that reflect an investor’s personal preferences, including asset class (stocks, bonds, futures, options, etc.) and sectors (consumer goods, health care, basic materials, etc.).

Investment portfolios will also lean more toward being either income or growth oriented. As a result, an income-oriented investor will select different stocks than a growth-oriented investor will.

That said, most investors like to have a balance of both. While capital appreciation is a great long-term reward, predictable and reliable income through dividends provides an excellent, steady stream of earnings that can be either paid out or reinvested into the respective companies.

One of the joys of dividend-yielding stocks is that they can provide both income and capital appreciation. And if the fundamentally strong dividend-yielding stock you’re investing in has a long track record of providing higher dividends, you don’t need to worry as much about the day-to-day or even month-to-month movements in the market.

People’s United Financial, Inc. (NASDAQ/PBCT) is the holding company for People’s United Bank, a diversified financial services company with $30.0 billion in assets. Founded in 1842, People’s United Bank is a premier, community-based regional bank in the northeast offering commercial and retail banking, as well as wealth management services, through a network of 419 retail locations in Connecticut, New York, Massachusetts, Vermont, New Hampshire, and Maine.

The company offers a generous 5.1% dividend yield, while its recently issued 10-year bond yields 3.5%. A fast-growing bank, People’s United Financial could become an attractive acquisition for a larger bank.

The company announced that fourth-quarter net income increased 47.8% … Read More


How to Save for Retirement Even When You’re Buried in Debt

By for Daily Gains Letter | Feb 14, 2013

DL_Feb_14_2013_JohnIt’s hard for some people to think of saving for retirement when they’re sinking in debt.

During the third quarter of 2012, total consumer debt stood at $11.3 trillion. Of the roughly 47% of American households with credit card debt, the average balance is more than $15,400. Average mortgage debt is $149,782, and average student loan debt sits at $34,703. (Source: “Quarterly Report on Household Debt and Credit,” New York Federal Reserve web site, November 2012, last accessed February 13, 2013.)

With an unemployment rate hovering near eight percent, a weak U.S. dollar, and anemic growth projected for the near future, U.S. households are trying to avoid further debt—especially high-interest debt, like credit cards. While less debt is good, a downturn in consumer spending also has the reverse effect of limiting the speed of economic recovery.

The need, or reluctance, to use credit cards for purchases also points to the fact that Americans have less money in their pockets, which does not bode well for a consumer-driven economy.

It also means that Americans have less money to set aside for retirement or a rainy day.

According to a study by the Employee Benefit Research Institute, just 14% of Americans are “very confident” they will have enough money to live comfortably when they retire; 23% say they are “not at all” confident. Many workers also noted that they have virtually no savings or investments. (Source: “The 2012 Retirement Confidence Survey; Job Insecurity, Debt Weight on Retirement Confidence, Savings,” Employee Benefit Research Institute web site, March 2012, last accessed February 13, 2013.)

Saving for retirement means investing in stocks and bonds; unfortunately, … Read More


One Way the Rich Are Getting Richer

By for Daily Gains Letter | Feb 14, 2013

Couple in living room toasting champagne and smilingFor 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:

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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