I have mentioned that I do some portfolio consultation for people. The quarter just ended so I exchanged emails with these folks in the last few days. One of these clients summed up the quarter noting a slight outperformance of the market attributed to a heavy weighting in dividend paying stocks.
Hello!
This was an astute observation and ties in with a lot of what I have written about over the months. A lot of smart people have been calling for flat(ish) returns for the foreseeable future. While we can't say how long this will persist it makes sense to think along these lines for now. This is a repeat of what I have written before but if the market only is up 1% for the year but you have a 3% yield for your portfolio that can help a lot.
This ties in with a belief of mine that you can only take what the market gives. The next 25% or 30% up year will be likely be where most of your growth will come from. Until then let healthy dividends do some of the work for you.
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6 comments:
Mr. Cramer never distinguishes between long and short-term. He never distinguishes between an investor and a trader. Maybe because Mr. Cramer himself continuously struggles whether he is a trader or an investor. As someone who has watched Mr. Cramer's antics and so-called performance for years now, I am convinced that Mr. Cramer is not patient enough to be an investor and too emotional to be a good trader. Yes, he has made money in 1999- 2000 but I doubt that it was thanks to his trading/ investing skills (and that is much as I will say about that). Mr. Cramer's performance (if it is ever fully disclosed and honestly represented) since then has been miserable at best. He has frequently panicked and sold bottoms (both in the market and in individual stocks) and bought into exhaustive top phase. It is utterly amazing to me that anti-Mr. Cramer trades appear by far to be the more profitable ones. It is nice that Mr. Cramer has written a book on the well-known basics of investing but maybe he should take his own advise.
Ooops, my earlier comment belongs to your post on Jim Cramer below this one.
My first inclination was to make a joke about saying how you really feel. I tend to agree with you comments. This of course makes me wonder why so many people just LOVE him. Baffling!
thank you for the comment
Roger:
While this is only speculation I think decent dividend yielding stocks also protect through lesser volatility.
- My understanding is that companies typically start paying dividends wen they reach a certain maturity, this doesn't mean that they've stopped growing, but there is a certain stability and speculation decreases.
- The more profits pushed into dividends the less into buying back shares and other activities which can push up price which means less dustance to fall.
- The dividend can act as a break, as the price falls the return increases, this provides psychological support for the owner and encouragement for new buyers especially in periods when values are flat or declining thus making dividend stocks more attractive.
So my guess is that if the company is sound then a decent dividend will keep it's price more stable.
while i don't believe in absolutes i think David's comments apply to many companies.
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