The markets were hoping testimony from Federal Reserve chairman Ben Bernanke could help continue yesterday’s rally, but investors were unable to sustain the momentum as last-hour selling had the averages closing mixed. Outside of saying the Fed will do everything in their power if need be (meaning print more dollars), we didn’t expect anything substantial from the chairman.
Looking at individual movers, shares of non-dividend payer Navistar (NAV) got hit hard, but investors did not panic with its competitors like Cummins Inc. (CMI). This could be a case of what is bad for Navistar may be good for Cummins. However, industrial names have been weak of late, so it could be just a pause in the recent selling. Men’s Wearhouse (MW) shares are plunging after the men’s clothing retailer gave cautious guidance on the heels of its latest earnings results. Best Buy (BBY) shares were down early on news the company’s chairman was resigning. The resignation carries a bit of extra weight as the chairman will likely look to sell off his 20% stake in the company at some point. In other news, positive Wall Street analyst commentary has shares of 3M (MMM) trading in the green.
Investors may be asking if today’s China decision to cut interest rates will put a solid floor under the markets. The reality is the last time China cut rates (March 2008), the global markets still kept moving lower, eventually bottoming almost a full year later. Time will tell if this scenario will repeat itself. In the meantime, we will continue to rely on our research to keep only the strongest possible names on our industry-leading Best Dividend Stocks List.Look Out Below: The Dangers of Trading
I’m not sure if many of our readers saw the blow-up in shares of mattress maker Tempur-Pedic (TPX) yesterday. The company’s shares fell nearly 50% in one day and are now trading at $22 and change. Here’s the thing: many momentum traders had been riding the stock’s ascent, and plenty of inexperienced traders were been hit hard as the stock plunged from $87 in mid-April to its current levels in the low $20′s.
Let me explain how inexperienced momentum traders get burned. It all comes down to discipline. The stock fell over 20% in late April on big volume. Most inexperienced traders that didn’t sell were likely buying on that initial dip, figuring the sell-off was overdone. The stock hung around in the $60′s for a few weeks until the next break lower took the shares to the mid-$40s, at which point, one figures they should buy more, and then if it rallies back to the mid-high $60′s, to get out and break even. Well, many traders’ hopes were dashed following the company’s earnings release yesterday, after which the shares were cut in half.
I can guarantee that the above events took place for many TPX traders recently. Trading requires insane amounts of discipline and impeccable timing on both ends of the trade. If one of those factors works against you, a little initial damage can wind up knocking you out of the game completely.
No one likes to discuss the ugly realities of “when good trades go bad,” but these scenarios happen more often than you may think — both to new and experienced traders. All it takes is one trade to let your discipline slip, and you could be set back financially quite a bit. That’s why I street people away from the supposed “thrills” of trading. The success rate is very low and the financial hurt lasts a long time. I was lucky enough to walk away from trading several years back in one piece, but only after putting in countless hours of preparation week after week. I don’t miss that grind one bit, and I’ve found that long-term dividend investing is a much more enjoyable exercise.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.
- Creating your own Watchlist allows you to track the performance, news, and upcoming dividend payouts of the particular stocks you care about.
- 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!
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