Investing in Dividends

In September, Microsoft boosted its payment by a solid 18%, and National Semi hiked a whopping 33%! Those aren’t token increases … they demonstrate solid financial wherewithal and loyalty to shareholders.

But how are tech companies boosting their dividends right now? Aren’t they the kind of firms most hurt by economic downturns?
On one hand, the answer is, “yes” — tech companies do feel the bite of weaker economic conditions. Many of their products are discretionary items themselves. Take software, for example. You might delay upgrading to the latest version of Windows right away. Ditto for video game systems like Xbox 360.

It’s the same thing in the case of semiconductors. Many of these tiny circuits end up in discretionary items like cellphones and televisions.

So demand for tech products is clearly cyclical. Always has been. Even corporate customers, which make up a large percentage of tech buys, can — and will — wait to upgrade their systems when business is on the decline.

But despite the cyclicality, America’s best tech companies still have big brand names. Their sizable businesses are difficult to compete with. Cash flows remain strong.

Plus, these companies have shown rigid fiscal responsibility, especially after the tech bubble burst. They have clearly survived tough times before, and are well aware of the risk of not being prepared for future downturns. As a result, these companies boast strong balance sheets.

That’s translating into bigger dividend payments and a rare bright spot for income investors.

InvestingInDividends.com

Sure, there’s probably plenty of time to take advantage of these prices. They may even get more attractive before all is said and done. But you can’t let fear freeze you in your tracks. You’ve got to keep looking ahead and planning for better days.

Never forget these two basic facts:

First, many of the market’s major advances have come swiftly, and without warning. And they almost always anticipate economic recovery.

Second, an all-cash portfolio will almost certainly underperform over any substantial length of time.
To be clear, now may not be the time to go “all in” on stocks or take unnecessary risks. The volatility is still a bit too high.
But you should stick to your plan… continue contributing to your retirement accounts … and diversify into some core income stocks if you haven’t already done so. These prices will not last forever!

Visit MoneyAndMarkets.com to learn more about big chance to buy the S&P 500 under 900.

To your dividend investing success,

InvestingInDividends.com

McDonald’s is a perfect example of a company boosting its dividend in the face of economic weakness.

In 2007, it decided to boost its annual payment by a whopping 50%. Then, just last month, it decided to increase its dividend another 33%!

That means investors holding these shares keep getting higher and higher effective yields on their original purchase price.

Let’s go back a little further into McDonald’s history, before the latest two dividend hikes, to see what kind of results a long-time investor would have gotten:

Pretend it’s March 26, 1990. You just finished polishing off a Big Mac at the local McDonald’s. Across the restaurant’s floor, you see a long line of customers in front of the register, wallets and purses in hand.

You go home and call your broker. “Buy me 100 shares of McDonald’s,” you say. That day, the stock closes at about $29 a share. Its indicated dividend is $0.31, making the stock’s yield slightly more than 1%.

The move is certainly no great leap of faith. By 1990, McDonald’s restaurants are everywhere — it’s the fast food company by which all others are judged. Its stock is considered “boring.”

Now fast forward 16 years to March 27, 2006. McDonald’s stock closes at $34.55 a share. Its indicated dividend is $0.67 a share, giving the stock an annual yield of 1.9%. Hey, that’s twice as much as when you bought it, right?

Nope.

During your 16 years of ownership, McDonald’s stock split 2-for-1 on two occasions. Adjusting for these splits, your purchase price is equal to $6.20 a share.

Dividing the current indicated dividend of $0.67 a share by your $6.20 cost basis gives you a yield on cost of 10.8%. Plus, you’re also sitting on paper gains of 457%. That’s an average annual return of 28.6%. And, in addition, you got regular cash payments the whole time!

InvestingInDividends.com

Out of the 500 companies in Standard & Poor’s flagship U.S. stock market index, 30 companies have cut their dividends so far this year.

Another 11 have completely suspended payments (or the companies themselves have ceased to exist).

Total damage to investors: $31.74 billion in missed dividends. As you’d guess, most of the pain has come from financial stocks, which accounted for 35 of the negative dividend actions and $30.6 billion of the lost dividends.

And if we look at all U.S. common stocks listed on major exchanges, the numbers are terrible. September marked the worst year for dividends as far back as we have records (1956). October looks like it will be equally bad.

So far this month, there have been 50 negative dividend actions compared to just seven during the same month last year.

But is it all doom and gloom? No way! Many companies are bucking the trend, and raising their dividends through thick and thin. There have been a full 216 dividend increases from companies in the S&P 500 so far this year.

For 32 companies in the index, 2008 marked at least the 25th straight year of higher and higher dividends. And perhaps the most concrete example that dividend hikes are still happening is the fact that THREE companies in the Dividend Superstars portfolio announced increases just last month!

The message is clear: Many businesses are still doing just fine. Their profits are holding up well. Their commitment to shareholders is unchanged.
To learn more about five investing in divideds and other dividend opportunities, read this amazing article. To your dividend investing success,

InvestingInDividends.com

Sure, stocks carry plenty of risk. But that risk is known. What’s more, it’s easily counteracted with inverse ETFs.

On the other hand, many so-called “safe” investments come with all kinds of hidden risks.

Let’s start with one of the most blatant examples — the fact that America’s oldest money market fund recently told its investors, “NO WITHDRAWALS.”

That was the first time in history that a large money market fund was forced to freeze out its customers from their deposits.

And what were investors getting for that unadvertised risk? An average annual return of 2.8%.

That’s not even enough to keep pace with rising costs for gasoline, health-care, food, and other daily necessities!

Moreover, in a money market fund, your principal never grows. If you’re lucky, you will end up with exactly what you started with — that’s the best result you can hope for. And because of inflation, what you started with will buy you a lot less than it does today.

You have the exact same problem with CDs and bonds. You take on risk, get low yields, and the value of the principal will get eaten away by inflation. Money funds, bonds, and CDs give you zero growth in your nest egg … they add nothing to your retirement fund … your child’s college fund … or your “just let me enjoy life” fund. They’re a dead end precisely when you need an open highway.

In contrast, plenty of dividend stocks boast rising payments year after year.

Learn more about why dividend payments are better income investments than bonds today.

To your dividend investing success,

InvestingInDividends.com

If you’re an income investor holding dividend stocks, you face a big problem in volatile markets like we have today. Even if you’re holding Dow stocks that have long histories of steadily rising dividend payments — stocks that are perfect long-term core income holdings — you run the risk of watching share prices plummet during sell-offs.

If you can handle the gut-wrenching declines that are part of the stock market game, great! A long-term perspective is important.

But what if you don’t want to just stand by and watch your portfolio lose value, even if it’s only on paper? You face a few choices …

A. You could sell immediately. But then your dividend checks will stop coming. Worse yet, you will probably end up jumping back in after the market rises — selling lower and buying higher. B. You could implement stop losses, which instruct your broker to sell your shares if they fall to a predetermined price. But again, you face the same problems above. A couple volatile days will knock you right off the income wagon.C. You could buy an inverse Dow ETF, which gives you immediate protection from a short-term market meltdown and allows you to keep your core income holdings (and the dividend streams!).C. is the best choice, especially when you use a double inverse ETF since it gives you twice the hedging power for the same money. Learn how to use Inverse ETFs today.

To your investing in dividends success,

InvestingInDividends.com

This latest bear market officially began on July 9, when the S&P 500 index closed 20.5% lower than its high made on October 9, 2007.

How low can stocks go based on history?

The average bear market in the S&P 500 has seen an average loss of 34.1% over 20 months. That would take us to 1031.49, approximately where the index sits today.

It’s worth noting that, technically speaking, the “500″ does have a lot of support in the low 1000-range, too. However, the 20-month average would take us out to the summer of 2009.

The last bear market — which lasted from March 2000 to October 2002 — took the entire “500″ down 49.1% over about 30 months. If we apply that loss to this cycle’s current high point, we arrive at an S&P 500 bottom of 796.66 somewhere around March, 2010. Yikes!

Worst case, historically speaking? The fiercest bear occurred back in 1937-1942, with the index losing 60% of its value over 62 months. Today, that would mean an S&P 500 of 626.1 in the beginning of 2013.

As you can see by these numbers, there could be plenty more pain ahead. But there is also a reason to buy when everyone else is fearful.

Look what has happened during the average bull market: A whopping 164% return over 57 months!

The historical lesson is clear: Bears can be absolutely brutal, but the ensuing bull runs have always paid off handsomely for patient investors.

Learn why it’s smart to start dividend investing while there’s blood in the streets.

To your dividend investing success,

InvestingInDividends.com

Keep Crashes in Perspective

As a stock investor, it’s hard to watch massive daily drops in the Dow and other benchmarks. They affect every single one of us with money parked in investments.

However, just for a little perspective, take a look at two charts.

The first chart shows you what the Crash of 1987 looked like during the hammering. As you can see, it was certainly NOT fun to be in the middle of it …

Now, here’s the same crash, five years later …

It took the Dow about two years to get back to its pre-crash level … and another couple years to move much higher.

Regardless, a new foundation was laid.

Take one last look at that chart. Did you notice the scale? Back then, just twenty years ago, the Dow was around 2500! And at the bottom of the crash, it was closer to 1700!

That puts the recent 778-point drop to 10,365 into perspective a little bit, doesn’t it?

Gain a better perspective in the dividend investing world.

To your dividend investing success,

InvestingInDividends.com

With regular IRAs:

- You contribute pre-tax money and thus save on your current taxes by lowering your taxable income
- Your contributions and earnings will be subject to taxation upon withdrawal
- You must begin withdrawing money at age 70½

With Roth IRAs:

- You contribute after-tax money and thus gain no upfront tax-savings benefit. But …
- Your contributions — and earnings — will never be taxed again, so long as you meet the basic guidelines (eligible age of 59½ and held for at least five years)!
- Plus, you never have to make minimum withdrawals, even if you live to be 110.

Both accounts …

- Give you a huge range of investment choices, pretty much everything offered by your broker.
- Can be funded until April 15 of the following year. In other words, you can put money in for 2008 as late as April 15, 2009.
- Allow catch-up provisions for contributors over the age of 50. In 2008, the regular limit for either IRA is $5,000 and $6,000 for age 50+.

Important: You can only contribute to a Roth IRA if your Modified Adjusted Gross Income (MAGI) falls within certain levels. The eligibility for these accounts phases out at certain modified adjusted gross income (MAGI) levels. So there’s no way for some people to know if they’ll qualify until they’ve done their taxes.

Here are the two, major Roth IRA MAGI category limits for the 2008 tax year…

- Single Filing Status: $101,000 or less for maximum contribution. Partial contribution between $101,001 and $115,999. No contribution over $116,000.

- Married Filing Jointly: $159,000 or less for maximum contribution. Partial contribution between $159,001 and $168,999. No contribution over $169,000.
Regular IRAs, on the other hand, have no income restriction for contributions, though the tax deductibility can be affected by MAGI.
There are no age restrictions for Roth IRAs — as long as you have earned income you can start socking away money. Your ability to contribute is also not affected by any retirement plan you might have through your employer. Get the insider scoop on IRAS right now.

To your dividend investing success,

InvestingIndividends

lot of news stories are hitting the wires given all the ups and downs in the market right now. And many of them are citing a term that is often misunderstood – “market breadth.”

Market breadth is a measure of how many companies in a particular index or market have gone up vs. how many have gone down. The majority rule, and breadth is then said to be either positive or negative.

For example, the S&P 500 contains 500 constituents. If 300 of those stocks closed in negative territory on a given day, that market had bad breadth. Conversely, if 400 of the stocks went up, market breadth would be considered very positive.

This measure is viewed as a window into investor sentiment. That’s because it’s a quick way of knowing just how widespread buying or selling was. It’s especially useful when you’re looking at a market-weighted index.

Reason: By design, they attribute higher importance to larger stocks. Thus, losses in larger shares can weigh the entire “market” down, even if the majority of stocks rose! Learn more about Market Breadth and how it can affect your
dividend investing.

To your dividend investing success,

InvestingInDividends.com