Despite the recent selling we have seen, the lack of real panic has some market watchers wondering if investors are really all that concerned with all the manic chatter surrounding the “fiscal cliff” headwinds in Washington.
As the markets continue to drag, fourth quarter earnings continue to flow. Seeing some investor selling on earnings results were shares of Wal-Mart Stores (WMT), Limited Brands (LTD), and Williams-Sonoma (WSM). Looking at Wal-Mart specifically, we’ve been wanting to see those shares take a breather after a ridiculous run this year. Too many investors buying brands forget that stocks need to grow into their valuations, especially when revenue growth is not exactly soaring higher.
On the flipside, investors cheered results from PetSmart (PETM) as the big pet retailing chain continues to have a solid year in 2012. Also higher on quarterly results are shares of Target (TGT) and Viacom (VIAB). Lastly, oil giant BP plc (BP) is getting close to turning the chapter on the company’s devastating oil spill disaster as settlement talks could be near a conclusion. BP’s shares finished sligher higher in today’s session.
As always, consult The Dividend Daily for our coverage on company earnings, analyst moves, and other news affecting dividend stocks.Hanging on to the Past
On a recent “Kitchen Nightmares” episode, the restaurant in question was a pizzeria/restaurant based in Brooklyn, New York, where the owner has been working for decades (his parents started the business in the 50′s and he worked there from 10 years old and on).
Unfortunately over the years, competition has intensified in the neighborhood and the ways the business thrived in the past was no longer working. The menu and recipes never changed and as Gordon Ramsey put it, the business was stuck in decades past. By the end of the show, the owner realized he needed to change and let go of the past.
Letting go of the past is a tough thing for many of us to do. I have an uncle who still pays the phone company for a rotary phone attached to a wall in his parents’ old apartment, which sits on the first level of their two-family home. His parents have long since been deceased and his daughter now lives there, but the phone still hangs in the same place, as it has for several decades. Obviously the phone holds a great deal of sentimental value for my uncle. That may be an extreme example, but you know how difficult it is for many people to move on.
Investors are no different. They will latch on to what has worked in the past and buy stocks that may have seen their better days. Right now, we are experiencing a real panic (courtesy of the business media) in regards to the incoming tax changes and what that means for stocks. Dividend stocks have not been immune to the selling as we have been seeing. But here’s the thing. If you were chasing some of the high-yielding names with little growth (i.e. utilities) and stretched valuations because yield was in super-demand, you are stuck unless you sold quickly.
We have been warning readers about the recent breed of new-found supposed income investors who were buying utility plays at valuations that were unsustainable. Throw in some momentum buyers who buy whatever is making new highs and the whoosh down we have seen should not come as a surprise. At some point, we will be looking at some of these dividend names again, especially if the selling gets overdone. It takes as much discipline to not chase the flavor of the day than it does putting money to work on a regular basis. But the recent action should serve as a lesson to remember for all dividend investors out there.2013 Dividend Guide Coming Soon!
We just wanted to let everyone know that we are working hard on a new 2013 Dividend Guide, loaded with our thoughts on what to expect in the coming year for dividend stocks. Again, this is only available to Dividend.com Premium members for download, so be sure you are signed up to receive the guide once it’s released! Last year’s Beat the Market with Dividend Stocks eBook was a smash success, and this year’s version will be even better. We anticipate releasing the new guide within the next couple of weeks.25 Years of Dividend-Increasing Stocks
We recently updated our list of dividend stocks that have been paying out dividends for 25 years or more. Be sure to check out the latest list of names here.Dividends Really Matter
Financial blog DailyReckoning.com recently took a look at the difference dividend payouts made in the overall return investors saw throughout the prior decades. Here are some of the highlights:
- The Nasdaq is down 28% since the end of 1999. Even the “blue chip” S&P 500 stocks are down 15% during that time frame…until you add back those “boring” dividends. With dividends included, the S&P 500′s 15% loss flips to a 6% gain.
- Without dividends, the S&P 500 index would have produced a loss for the 25 long years from August 1929 to August 1954. Then again, without dividends, the S&P 500 produced a 5% loss during the 13 years from September 1961 to September 1974. But with dividends included, the S&P’s loss became a 46% gain.
- Over the course of the last half-century, dividends have contributed more than half of the stock market’s total return — 56%, to be exact.
Of course, you can’t discuss the potency of dividend investing without making mention of how awesome compound returns are. I can’t stress enough the power of compound interest: you take a small amount of money and turn it into a large amount over time. Finding the right companies at the right price points which not only grow earnings, but also grow their dividend payouts as well!New Watchlist Article Out Today
Be sure to check out our weekly Top 50 High-Yield Watchlist Names post that is out today, exclusively for Dividend.com Premium members. This list gives readers a good idea of what stocks we’re watching behind the scenes here for potential upgrades.Go Beyond This Newsletter
We know many of you enjoy reading the daily newsletter, but remember that with our Dividend.com Premium service, the newsletter is just one small component of what we offer. Here are the “Big Three” benefits of our Premium service:
- The Best Dividend Stocks List is used by tens of thousands of investors to help build their own portfolios.
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- Finally, we offer the most complete and easy-to-use dividend data on the web. Many subscribers use this data as part of a “Dividend Capture” trading strategy, but long-term investors can use it to keep track of impending payouts. Just visit our Ex-Dividend Calendar for a complete outlook on which companies will be paying out soon.
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Thanks for reading, and I’ll see you tomorrow!