January 03, 2013 at 16:25 PM EST
Market Wrap-Up for Jan.3 (FDO, MA, V, HRL, F, more)

The markets were a bit quieter today following yesterday’s euphoric rise on the back of the fiscal cliff resolution. As I’ve said before, celebrating higher taxes and no spending cuts is quite peculiar, but we’ll not bemoan the market gains. Plus, the tax raises on dividends were much lower than many had feared.

Looking at today’s movers, Family Dollar Stores (FDO) got hit hard after a disappointing earnings report. Hormel Foods (HRL) ended higher after the company announced it would purchase the Skippy Peanut Butter brand from Unilever. Visa (V) and Mastercard (MA) ended well off earlier highs after jumping out to a food start following an analyst boost. Ford (F) added some gains following the company’s monthly sales report. On the downside, Aflac (AFL) and Wellpoint (WLP) lagged following cautious analyst commentary.

Emotion and Reality

We saw quite a rally yesterday (market averages surged 3%), as the mere fact we avoided a fiscal cliff crisis was enough to inspire plenty of new money into the markets. Never mind the fact that payroll taxes are going back up, which will directly reduce the amount of money consumers can spend. Here’s the cold hard reality: instead of paying 4.2% of your paycheck to fund social security’s deepening money hole, you’ll now pay 6.2%. With the economy basically built on consumer spending, this news fundamentally can not be any good.

This development brings us to the dangers of investors and traders instantly reacting to the constant sound bytes coming out of today’s business media. Those who have the bulk of viewer eyeballs are running on an ad-driven model. The way to drum up more viewers is to bring in the element of shock and awe. It’s a daily variety of bullish forecasts, the occasional bear who they bring on only when the market is getting hit, predictions on just about every data point, earnings reports, and now unfortunately, political vantage points that have taken an ever-so growing grip of affecting market movements. Notice how the debt ceiling cliff is now being talked up, mere seconds after one crisis (fiscal cliff) gets resolved.

Economic data points continue to contradict each other on a daily basis. Most retail numbers from the holiday shopping season appeared to be considerably below forecasts, yet this morning we saw monthly retail sales for December come in better than expected for companies such as Ross Stores (ROST), TJX Companies (TJX), and Nordstrom Inc. (JWN), just to name a few. Here at Dividend.com, we have to try and parse through what is the actual reality of the reported data. We get the fact that “green on the screen” is all that matters for investors, but letting emotion dictate how we approach making money is a dangerous game. We are cognizant of the fact margin debt is at 5-year highs and exactly how well this bodes for the market is certainly arguable. Investing alongside individuals who are leveraging up to their eyeballs can make for quite a treacherous climate the minute the celebratory music stops.

At the end of the day, we need to carefully consider how to navigate through all these facts and plenty more. Patting yourself on the back of a one day spurt has little bearing on what the eventual goal is to building long-term wealth. Plenty of fortunes are lost when emotions run high. Pace yourself and keep your expectations reasonable. With today’s manic business coverage we know it’s hard, but try your best anyway!

Our 2013 Dividend Stock Guide Has Arrived!

Our new members-only eBook has just been released! This 250-page guide to investing in 2013 contains a concise economic forecast for next year, including full previews for 60 big-name stocks! Be sure to head over to Dividend.com Premium and download it and get your game plan in place for all good things dividend-related in 2013!

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!

We have much more about why Dividends are so awesome if you check out our “What is a Dividend?” page here.

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!

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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