Despite today’s break in the recent selling, investors should be using the pop in the averages to go through their portfolio and make cuts to underperforming names, if necessary. We know investors that follow our service sometimes gander in the non-dividend space as well as the “deep value” bin we tend to avoid. If you are holding any of those sort of names, spikes like today are great times to pull these weeds out.
Looking at today’s big movers, energy stocks saw a bounce, led by Chevron (CVX), Exxon Mobil (XOM), and ConocoPhillips (COP). Transport plays were higher despite the jump in oil prices. Union Pacific (UNP) and FedEx (FDX) paced the gains there. With talk of further ECB accommodation, financial stocks bounced off the recent bottom, led by JP Morgan (JPM), Morgan Stanley (MS), and Citigroup (C).
We removed another dividend stock from our Best Dividend Stocks List this morning. We still like the name, but would wait to add new money to the shares for now. Check out the name we downgraded along with a full explanation here.Further Color on Our Recent MLP “Sell” Call
We do our best to make our calls as timely as possible. Unfortunately, we can’t please every single subscriber, especially when a “sell” call is issued.
Our main concerns with MLPs in general is the effect falling oil prices will have on profits ultimately. Commodity-related investments are unusually cyclical. When prices collapse, often times estimates will get slashed dramatically, thus what appears as a great valuation suddenly becomes expensive.
Ultimately the market will decide if our call makes sense going forward. If we are right and the sector pulls back, we will look for a stability in oil/energy prices to consider MLPs again. Nothing is ever permanent (bullish or bearish) when it comes to investing. MLP’s have been fantastic investments for years, but things could be changing as our research flashes caution.Discipline + Compound Interest = Winning Strategy
You will often hear me mention compound interest as the biggest weapon we dividend investors have at our disposal. Just look at the example of someone who has not invested a dime yet and just turned 55 years of age. If this person simply follows the dividend investing discipline we talk about on Dividend.com, they can start investing $5K a year at age 55, and by the time they reach 75 years of age, their $100K invested over 20 years will be worth over $800K (based on historic dividend annual returns of 11% a year, with stock price appreciation + dividends reinvested).
Every day I see a different story on the best way to save and invest for retirement. Much of the advice is dumbed down (like “buy index funds” — as if that has made any money for investors the past 10 years) to the point where performance is lacking. This mediocre advice makes folks wonder if they can ever make any headway in building a nest egg. In turn, many people turn to financial advisors who may or may not be well-versed when it comes to investing.
I say it time and time again: you need to own assets that produce income. Many people make the mistake of believing their home is an investment. Owning your own home is fine, but I urge you not to think of it as an asset. And certainly don’t sink your entire nest egg in your home. Instead, you need to develop income streams in order to increase your net worth substantially. Don’t let the market commentators intimidate you into thinking you can’t take on part of the challenge of building income on your own. The market is only a scary place if you are playing the riskiest areas (which we do our best to help you avoid).
Long story short, as long as you invest consistently in the best possible dividend stocks, you’ll be well on your way to building long-term wealth.No One Stock Should Ever Take Down Your Entire Portfolio
If you’re trying to be a successful dividend investor, your portfolio should be diversified enough to withstand an occasional mistake. We all buy a bad stock every once in a while, or disregard our discipline and hold onto names too long. Normally, these mistakes are no big deal. You cut your losses and move on to greener pastures. If you make mistakes in a portfolio of too few stocks, however, you could put a big dent in your plans for long-term wealth.
Is there risk in investing? Of course, but not as much as you might think — if you take the proper approach and don’t get sucked into rapid-fire trading action. Building wealth takes time, and dividend investing is a great way any investor can stomach the ups and downs of the stock market.
Based on the market data we have from the last 80 plus years, the best possible route for the vast majority of all people is to buy quality dividend-paying stocks. 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. Patience and consistency are required, but we all need to begin practicing some discipline if we are going to get the financial ship headed in the right direction.
To sum it up, long term investing requires consistent discipline, diversification, and time. When combined, these factors can eventually can make you a Dividend Millionaire!Scaling In
I always advocate scaling into positions. When you gradually accumulate shares over time, you avoid any potential panic when a stock you just bought falls in price. For many that are subscribers to our Dividend.com Premium service, the goal is to build wealth and create a new income source. This strategy isn’t a 40-yard dash, but instead a steady jog toward the finish line. The idea is to consistently make money available that can then be put to work for you.An Important Note Regarding the Best Dividend Stocks List
We want to make sure everyone understands that the stocks on our Best Dividend Stocks List are the names we currently like for new investor capital, regardless of what date the stock was first recommended on. If and when a stock is removed from the list, we will clearly state whether the stock should be sold (which is rare but occasionally will happen), or simply held in one’s account until we see a better entry point or catalyst.
And here’s one last thing to remember about what we do here at Dividend.com: it’s not just the names that we recommend that can help you build wealth, but also the things we try to steer you away from that are just as important. Forget about speculative or penny stocks, chasing unprofitable IPOs, and listening to the manic talking heads in the business media!Our Beat The Markets with Dividend Stocks eBook Has Arrived!
We just debuted our brand new 275-page eBook, exclusively on Dividend.com! In this digital-only book, we look ahead to 2012 and the main factors that could affect dividend investors. A $39.95 value, the eBook is a free download for paid Dividend.com Premium subscribers.
Beat The Markets with Dividend Stocks contains a full economic forecast for 2012, including in-depth analysis on 65 of the biggest dividend stocks out there. It’s a great way to get prepared for your investing next year! So head over to the Dividend.com Premium homepage now to download your copy.A Dividend Capture Strategy for Active Investors
We now offer complete U.S. dividend data for all Dividend.com Premium members, so anyone that focuses on “Dividend Capture” trading strategies should have plenty of good stuff to research each day. Just check our enhanced Ex-Dividend Calendar, which is the best in the business, to search for upcoming payouts.
Speaking of dividend capture, Dividend.com Premium members can also access a 9-page report we published on the essential elements to any successful dividend capture strategy. Be sure to check it out here on the Premium homepage.Dividend.com’s Very Own National TV Commercial Has Debuted
Our first-ever television commercial! has started running on CNBC and the feedback has been wonderful. If you haven’t seen the link yet, you can check out our commercial here.
Thanks for reading everybody. I’ll see you tomorrow!