Dividend Stocks
SPDR S&P DIVIDEND INDEX FUND
AMEX: SDY
May 22 11:25 AM
no chart
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Last price70.46Prev Close70.22
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Change0.24% Change0.3%
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Open70.15Volume8,909,032
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Day Low70.17Day High70.77
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Bid70.46Ask70.45
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52 Wk Low51.7052 Wk High70.22
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Market Cap116,406ExchangeAMEX
Today
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These Dividend Stocks Offer the Best of Both Worlds—Both Growth and Big Yields
I want to let you in on a little secret: You really can enjoy the best of both worlds.
With a little bit of digging, you can uncover companies that not only offer growth but pay good dividends as well.
Now admittedly, there has always been something of a perceived conflict between the two.
The classic theory has been that real growth companies need to retain all of their earnings to have the capital to expand, whereas high-paying dividend stocks are simply "too mature" to be considered good growth opportunities.
But here's the thing. This well-worn theory is wrong on both counts.
In fact, the best companies to put in your nest egg are often what I call "heirloom" investments.
Heirloom investments are companies which have not only maintained their dividends for 30 years or more-- but have increased them every step of the way.
For investors, it's like getting growth and dividends all rolled into one.
Take Emerson Electric Co. (NYSE:EMR) for example.
This heirloom investment has increased its dividend every year since 1957. They haven't been trivial increases, either.
If you look at Emerson's dividend record over the last 20 years, you will find that its quarterly dividend has risen from 8.62 cents in the third quarter of 1992 to 40 cents today.
That's a compounded growth rate of 8.0%, far above the average 2.5% consumer price inflation rate during this same 20-year period.
Granted, it may not sound like much in a single year--but over a 20-year period it's the kind of difference great fortunes are made of.
Add Emerson's annual dividend growth rate of 8.0% to its dividend yield of 3.1% and you get an annual return of 11.1%. Over 20 years, that will turn every $100 invested into $820.83.
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Cisco Systems (Nasdaq: CSCO) is Looking More and More Like a Dividend Stock
Since the height of the dot.com boom, the transformation of Cisco Systems (Nasdaq: CSCO) has been extraordinary.
These days, the Silicon Valley Internet giant looks more and more like a dividend stock rather than an explosive growth company.
In fact, last Wednesday, the San Jose-based behemoth increased its dividend rate by a whopping 75% (from 8 cents per share to 14 cents) starting with the present quarter. That gives shares of Cisco a new dividend yield of roughly 3% which among the highest of major tech stocks.
For investors seeking a reasonably safe return and a less volatile investment, a great deal of value can be found in Cisco these days since the company now plans to return half of its cash flow to investors by way of dividends and stock buybacks.
And while the company may not post eye-popping revenue growth year-after-year, Cisco does appear poised to post healthy results and robust cash flow for years ahead.
That means Cisco's dividend will be both safe and stable.
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Fiscal Cliff 2013: How Investors Can Prepare
Late science fiction writer Ray Bradbury wasn't referring to investors when he said, "you've got to jump off cliffs all the time and build your wings on the way down," but he might as well have been referring to the upcoming fiscal cliff in 2013.
The fiscal cliff is a real crisis looming at year's end. The fragile U.S. economy could face an unparalleled fiscal punch of as much as $720 billion if the scheduled changes go through as planned. They include the Bush-era tax cuts set to expire Dec. 31 and billions of dollars in programmed federal spending cuts.
U.S. Federal Reserve Chairman Ben Bernanke has warned that shocks from such changes will most likely cause the economy to contract, causing a recession.
And without cooperation from Congress, there's no alternate route for the U.S. economy to take.
Ernie Gross, Ph.D., MacAllister Chair and professor of economics at Creighton University, told Forbes, "The fiscal cliff is an almost 100% certainty."
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The Five Questions You Need to Ask Your Financial Advisor Right Now
If you have a financial advisor you need to read this-especially if you are one of the 99%.
That's everybody who isn't a gazillionaire. You may know a few people who fit this bill.
Being a 99-percenter just means that you want to do better.
In that regard, you're no different than the 1%. They just have more money and by extension more freedom than you.
That doesn't mean they are any smarter.
I know plenty of uber-rich people who are financially inept. You probably do, too.
What sets people apart sometimes, though, is as simple as the questions they ask. True 1-percenters have this down pat-even if they don't have a gazillion dollars.
Here are five things you need to ask your financial advisor today if you want to join them.
If you do, you'll profit more consistently, reduce your risk and invest with greater peace of mind.
And I have no doubt that you will join the real 1%.
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Why to Buy Dividend Stocks Now
Before the financial crisis, prudent investors counted on CDs, U.S. Treasuries and savings accounts to provide them with decent interest income for their retirement.
But thanks to Federal Reserve Chairman Ben Bernanke's zero interest rate policy, prudence has become a tough way to fund your golden years.
With few places to find refuge and income, these cautious investors have been forced to look elsewhere-namely at dividend stocks.
Dividends, long used to pad portfolios with income, are no longer a risk-on or a boring way to invest.
Not only do dividends add value, but with a careful selection across several sectors, an investor can build a nice portfolio covering a broad range of industries.
What's more, dividend-paying stocks provide reliable returns at regular intervals, offer growth potential, and are not typically as economically sensitive as other high-beta and volatile companies.
Another bonus is that when the economy wanes and stock markets fall, dividend stocks pay investors to wait it out until things improve.
And since cash dividends are paid from a corporation's current earnings and profits, dividend investors have the added prospect that they may see their dividend payments raised as things improve.
That's why dividend stocks have been a long-term bright spot with investors clamoring for higher yields.
Nick Lawson, head of synthetics, macro and cross-selling for Deutsche Bank, told the Financial Times, "We've had a lot of people from fixed income coming into equities. I think it is straight yield. We have all been forced up the yield curve."
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