Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Dividend Payments

When a company makes a profit, it can distribute some of these funds as dividend payments. Dividend payments are one of three action steps a company can take with its profits to benefit a shareholder; the other two include buying back stock and re-investing the funds in the company. When interest rates are low, many investors look to dividend payments for a source of income. One has to be careful that the dividend payments are sustainable over a long period of time.

“Need to Know” Info About the Coming Retrenchment

By for Profit Confidential

equity marketThere are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.

Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.

Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.

Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.

Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with technology stocks. (See “Why I Like This Blue Chip So Much [55th Dividend Increase Just Announced].”)

So with the huge price moves, the case for a major retrenchment/correction/consolidation in the equity market is very solid. But there needs to be a catalyst for this to happen. The equity market is overbought and looking tired, but there is still a strong willingness on the part of institutional investors to … Read More

Strong Cash Flow, Increasing Dividends Make This Old Economy Stock Attractive

By for Profit Confidential

Increasing Dividends Make This Old Economy Stock AttractiveBlue chips across the board have been taking a break, along with the rest of the stock market. But in my mind, their leadership remains intact, and so does the performance of the Dow Jones Transportation Average.

This index recently broke below its 50-day simple moving average (MA), but this is very normal and not a trendsetting event. Many component stocks have been on fire all year and are due for a sustained period of retrenchment.

One component company that I continue to like is Union Pacific Corporation (UNP). The railroad sector is old economy, but it’s still a solid gauge on domestic economic activity. Plus, Union Pacific is a solidly profitable company that provides growing dividends to shareholders. The stock is currently yielding 2.1%.

Perusing the company’s regulatory filings, what stands out is Union Pacific’s strong financial recovery from 2009, when business operations experienced a pronounced downturn. Of course, we’re dealing with a very mature blue chip company, so financial growth isn’t like a small-cap technology stock. But the company really did turn its financial metrics around in a diligent manner, and the results are evidenced in its share price performance.

Union Pacific Corporation Chart

Chart courtesy of www.StockCharts.com

Union Pacific’s operating revenues dropped significantly from $18.0 billion in 2008 to $14.1 billion in 2009. But the recovery was swift, as 2010’s operating revenues came back up to $17.0 billion, followed by $19.6 billion in 2011 and $20.9 billion last year.

Notable in the company’s economic recovery was its earnings and dividend payments to shareholders.

Earnings in 2009 fell to $1.89 billion from $2.3 billion in 2008. They recovered commensurately with revenues to … Read More

Equity Market Super Stock Adding Up to Solid Returns

By for Profit Confidential

Equity Market Super Stock Adding Up to Solid ReturnsOne company I consistently like for long-term investors looking for dividend payments is PepsiCo, Inc. (NYSE/PEP).

This is the kind of company that can be put into retirement accounts and held for long periods of time with dividend reinvestment.

The equity market has been very kind to PepsiCo since the beginning of this year. Like many blue chips, it has ridden a wave of enthusiasm by institutional investors looking to bid the equity market with the safest names.

PepsiCo offers safety as a corporation with an array of beverage products that are sold worldwide. The many brands that the company maintains are complemented by its snack business. The two businesses go hand-in-hand.

As a multinational company, currency translation plays a big role in its numbers. In the first quarter of 2013, organic revenue growth was a solid 4.4%, but after currency translation, this fell to a mere one percent.

The company’s Americas Foods division was the highlight, producing organic revenue growth of six percent (five percent after currency translation). PepsiCo experienced business growth in all its Americas Foods segments, which include Frito-Lay North America, Quaker Foods North America, and Latin America Foods.

PepsiCo’s first-quarter financial results beat consensus, and big investors celebrated the modest stability.

The equity market has generally been a consistent accumulator of shares in this company. Featured below is PepsiCo’s 25-year stock chart, adjusted for splits:

Pepsico Inc Chart

Chart courtesy of www.StockCharts.com

Consistent with its previous guidance for 2013, the company expects seven-percent growth in its core constant currency earnings per share this year. Combined with its dividend yield of nearly three percent, that’s a decent equity market … Read More

Earnings Season Is Here; Will the Numbers Be Kind?

By for Profit Confidential

Earnings SeasonThere is positive momentum going into fourth-quarter earnings season. The earnings results we’ve had so far from brand-name large-caps are encouraging. We can’t forget, however, that expectations and consensus estimates have come down a lot, especially because of third-quarter earnings results. I think the stock market will be pleasantly surprised when it gets results from the key financial and technology stocks. Outperformance should be plentiful, but only because of the reduced outlooks.

Oracle Corporation (NASDAQ/ORCL) reported great numbers in its latest earnings report. The stock is trading right at its 52-week high, and if you eliminate the huge upward spike in the company’s share price in 2000, its long-term stock market chart is excellent.

Oracle Corporation Chart

Chart courtesy of www.StockCharts.com

Oracle is a good barometer for enterprise technology spending. After its recent earnings report, across the board, Wall Street analysts increased their expectations for the coming quarters. The fact that Oracle recently reported such a good quarter bodes well for the rest of the technology sector.

Another big-name company, which experienced tough business conditions last quarter, is NIKE, Inc. (NYSE/NKE). The company’s most recent earnings report showed a marked improvement in its financial metrics, with particular strength coming from the U.S. market. NIKE is a good barometer on consumer spending, and the company’s long-term track record on the stock market is excellent. NIKE’s stock market chart is featured below:

NIKE Inc Chart

Chart courtesy of www.StockCharts.com

Still, no one is expecting runaway growth, in terms of earnings or revenues. And there is no bankable trend in the economy as of yet. Strength in fourth-quarter earnings could easily turn out to be a one-shot deal.

I’m … Read More

My Near-Term Outlook for the Market as We Start 2013

By for Profit Confidential

Outlook for the Market as We Start 2013The S&P 500 had a pretty good year in 2012, up approximately 11.5% not including dividends. But, as is the norm in the current stock market, trading action remained choppy without any real trend.

The S&P 500 began 2012 strongly, rising consistently until May, when the index gave up all its gains. Then, with equal fervor, the S&P 500 moved solidly higher until September, before consolidating and pulling back on worries over the fiscal cliff. A lot of Wall Street analysts are saying to sell the current mini rally; but I’d wait until we get a look at fourth-quarter earnings to determine whether this turns out to be worthwhile.

There’s been quite a bit of consistency in the performance of the S&P 500 index since the stock market broke out of its low, set in March 2009. Solid rallies are met with solid retreats. The stock market advances, and then consolidates for a gain for the year. The year 2013 is likely to yield the same kind of trading action for the simple reason that investment risk is so high. The eurozone is in recession, and U.S. economic growth is really low. China and other Asian countries are export-driven, so their economic news shouldn’t surprise to the upside. Featured below is a three-year chart of the S&P 500 index:

 

$SPX S&P 500 large cap index stock market chart

 

Chart courtesy of www.StockCharts.com

The next major hurdle for the stock market in terms of policy action (or a lack thereof) is related to the debt ceiling. Previously, the stock market experienced a mini correction after policymakers were unable to extend a government shutdown due to the rising deficit. … Read More

« Older Entries

“Need to Know” Info About the Coming Retrenchment

By for Profit Confidential

equity marketThere are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.

Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.

Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.

Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.

Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with technology stocks. (See “Why I Like This Blue Chip So Much [55th Dividend Increase Just Announced].”)

So with the huge price moves, the case for a major retrenchment/correction/consolidation in the equity market is very solid. But there needs to be a catalyst for this to happen. The equity market is overbought and looking tired, but there is still a strong willingness on the part of institutional investors to … Read More

Strong Cash Flow, Increasing Dividends Make This Old Economy Stock Attractive

By for Profit Confidential

Increasing Dividends Make This Old Economy Stock AttractiveBlue chips across the board have been taking a break, along with the rest of the stock market. But in my mind, their leadership remains intact, and so does the performance of the Dow Jones Transportation Average.

This index recently broke below its 50-day simple moving average (MA), but this is very normal and not a trendsetting event. Many component stocks have been on fire all year and are due for a sustained period of retrenchment.

One component company that I continue to like is Union Pacific Corporation (UNP). The railroad sector is old economy, but it’s still a solid gauge on domestic economic activity. Plus, Union Pacific is a solidly profitable company that provides growing dividends to shareholders. The stock is currently yielding 2.1%.

Perusing the company’s regulatory filings, what stands out is Union Pacific’s strong financial recovery from 2009, when business operations experienced a pronounced downturn. Of course, we’re dealing with a very mature blue chip company, so financial growth isn’t like a small-cap technology stock. But the company really did turn its financial metrics around in a diligent manner, and the results are evidenced in its share price performance.

Union Pacific Corporation Chart

Chart courtesy of www.StockCharts.com

Union Pacific’s operating revenues dropped significantly from $18.0 billion in 2008 to $14.1 billion in 2009. But the recovery was swift, as 2010’s operating revenues came back up to $17.0 billion, followed by $19.6 billion in 2011 and $20.9 billion last year.

Notable in the company’s economic recovery was its earnings and dividend payments to shareholders.

Earnings in 2009 fell to $1.89 billion from $2.3 billion in 2008. They recovered commensurately with revenues to … Read More

Equity Market Super Stock Adding Up to Solid Returns

By for Profit Confidential

Equity Market Super Stock Adding Up to Solid ReturnsOne company I consistently like for long-term investors looking for dividend payments is PepsiCo, Inc. (NYSE/PEP).

This is the kind of company that can be put into retirement accounts and held for long periods of time with dividend reinvestment.

The equity market has been very kind to PepsiCo since the beginning of this year. Like many blue chips, it has ridden a wave of enthusiasm by institutional investors looking to bid the equity market with the safest names.

PepsiCo offers safety as a corporation with an array of beverage products that are sold worldwide. The many brands that the company maintains are complemented by its snack business. The two businesses go hand-in-hand.

As a multinational company, currency translation plays a big role in its numbers. In the first quarter of 2013, organic revenue growth was a solid 4.4%, but after currency translation, this fell to a mere one percent.

The company’s Americas Foods division was the highlight, producing organic revenue growth of six percent (five percent after currency translation). PepsiCo experienced business growth in all its Americas Foods segments, which include Frito-Lay North America, Quaker Foods North America, and Latin America Foods.

PepsiCo’s first-quarter financial results beat consensus, and big investors celebrated the modest stability.

The equity market has generally been a consistent accumulator of shares in this company. Featured below is PepsiCo’s 25-year stock chart, adjusted for splits:

Pepsico Inc Chart

Chart courtesy of www.StockCharts.com

Consistent with its previous guidance for 2013, the company expects seven-percent growth in its core constant currency earnings per share this year. Combined with its dividend yield of nearly three percent, that’s a decent equity market … Read More

Earnings Season Is Here; Will the Numbers Be Kind?

By for Profit Confidential

Earnings SeasonThere is positive momentum going into fourth-quarter earnings season. The earnings results we’ve had so far from brand-name large-caps are encouraging. We can’t forget, however, that expectations and consensus estimates have come down a lot, especially because of third-quarter earnings results. I think the stock market will be pleasantly surprised when it gets results from the key financial and technology stocks. Outperformance should be plentiful, but only because of the reduced outlooks.

Oracle Corporation (NASDAQ/ORCL) reported great numbers in its latest earnings report. The stock is trading right at its 52-week high, and if you eliminate the huge upward spike in the company’s share price in 2000, its long-term stock market chart is excellent.

Oracle Corporation Chart

Chart courtesy of www.StockCharts.com

Oracle is a good barometer for enterprise technology spending. After its recent earnings report, across the board, Wall Street analysts increased their expectations for the coming quarters. The fact that Oracle recently reported such a good quarter bodes well for the rest of the technology sector.

Another big-name company, which experienced tough business conditions last quarter, is NIKE, Inc. (NYSE/NKE). The company’s most recent earnings report showed a marked improvement in its financial metrics, with particular strength coming from the U.S. market. NIKE is a good barometer on consumer spending, and the company’s long-term track record on the stock market is excellent. NIKE’s stock market chart is featured below:

NIKE Inc Chart

Chart courtesy of www.StockCharts.com

Still, no one is expecting runaway growth, in terms of earnings or revenues. And there is no bankable trend in the economy as of yet. Strength in fourth-quarter earnings could easily turn out to be a one-shot deal.

I’m … Read More

My Near-Term Outlook for the Market as We Start 2013

By for Profit Confidential

Outlook for the Market as We Start 2013The S&P 500 had a pretty good year in 2012, up approximately 11.5% not including dividends. But, as is the norm in the current stock market, trading action remained choppy without any real trend.

The S&P 500 began 2012 strongly, rising consistently until May, when the index gave up all its gains. Then, with equal fervor, the S&P 500 moved solidly higher until September, before consolidating and pulling back on worries over the fiscal cliff. A lot of Wall Street analysts are saying to sell the current mini rally; but I’d wait until we get a look at fourth-quarter earnings to determine whether this turns out to be worthwhile.

There’s been quite a bit of consistency in the performance of the S&P 500 index since the stock market broke out of its low, set in March 2009. Solid rallies are met with solid retreats. The stock market advances, and then consolidates for a gain for the year. The year 2013 is likely to yield the same kind of trading action for the simple reason that investment risk is so high. The eurozone is in recession, and U.S. economic growth is really low. China and other Asian countries are export-driven, so their economic news shouldn’t surprise to the upside. Featured below is a three-year chart of the S&P 500 index:

 

$SPX S&P 500 large cap index stock market chart

 

Chart courtesy of www.StockCharts.com

The next major hurdle for the stock market in terms of policy action (or a lack thereof) is related to the debt ceiling. Previously, the stock market experienced a mini correction after policymakers were unable to extend a government shutdown due to the rising deficit. … Read More

Surrounded by DRIPs? It Just Might Be the Best Thing for You

By for Profit Confidential

Just Might Be the Best Thing for YouThere are plenty of stocks out there that have proven to be worth buying when they’re down. These are established businesses that are very good at what they do; the only problem being that they typically aren’t down on the stock market for very long. Over the coming weeks, I want to highlight some of these companies. They are large-cap dividend paying stocks that I feel long-term stock market investors can build a position in over time.

My first highlighted company may come as no surprise. I continue to look at PepsiCo, Inc.’s (NYSE/PEP) long-term track record on the stock market with amazement. This stock has been ticking higher virtually unabated since 1984. On a split-adjusted basis, the stock was trading around $2.00 a share at the beginning of 1984; now it’s at $70.00. That’s a 35-bagger, and that doesn’t include all those increasing dividends. With dividends reinvested in shares, the investment return is substantially larger. PepsiCo’s recent stock chart is below:

PEP Pepsico, Inc stock market chart

Chart courtesy of www.StockCharts.com.

And the returns are still very impressive over recent history. In 1995, the stock was trading at $20.00 a share, in 2000 it was $35.00, in 2005 it was $50.00, and in 2010 it was at $60.00. Every single time, save one, the share has recovered on the stock market after a major pullback. Like many companies, PepsiCo’s stock hasn’t quite got back up to its all-time high, set in November of 2007 around $77.00 a share.

PepsiCo has a great dividend reinvestment plan (DRIP). You can reinvest all of your quarterly dividends, or just a portion of them, back into company shares. … Read More

How to Take Advantage of Special Year-End Dividend Payments

By for Profit Confidential

Special Year-End Dividend PaymentsWith the year soon coming to a close, an increasing number of firms are making special dividend payments to get ahead of the expected hike in taxes next year. This investment strategy to make special one-time dividend payments is a direct result of the inability of our political leaders to come up with long-term solutions for our tax policies.

One of the biggest problems when devising an investment strategy is dealing with uncertainty regarding taxes and regulation. How can a person or company develop an investment strategy—whether it’s regarding dividend payments or capital allocation to plant and equipment—if we don’t know what the tax rates will be over the next few years?

Short-term changes that are temporary in nature do not have the same effect as permanent, structural changes to the system. People are smart enough to realize that a temporary tax adjustment is just that, temporary. When certainty is known, people take appropriate action regarding their investment strategy; we’re seeing that now with a lot of companies issuing special dividend payments ahead of the certainty regarding the increase in tax rates next year.

I previously mentioned this phenomenon in my article “How You Can Beat the Higher Taxes Coming Up,” and since then, we’ve had several more companies issue special dividend payments as an investment strategy. Compared to last year, companies are issuing one-time dividend payments at four times the rate, due to the shift in next year’s tax policies. (Source: “Las Vegas Sands’ Adelson Earns $1.2 Billion From Dividend,” Bloomberg, November 27, 2012.)

LVS Las Vegas Sands Corp.NYSE Stock market chart

Chart courtesy of www.StockCharts.com

Las Vegas Sands Corp. (NYSE/LVS) recently joined a group … Read More

Stock Market Trading Action Signals Breakout Coming

By for Profit Confidential

Stock Market Trading ActionEver since the beginning of June, when the stock market came out of its correction, there has been seesaw-trading action with three meaningful peaks and valleys in the S&P 500 Index. We’re now working on the fourth, and who knows where it will lead.

Expectations for corporate profits continue to come down, and any positive investor sentiment is likely due to the lingering hope for additional monetary stimulus from the Federal Reserve. It really is a wacky stock market these days, because there is no certainty. Stock market investors don’t have any reasonable expectation of what their holdings might do, and therefore, investment risk remains very high.

The only thing that’s reasonable for equity investors to feel certain about is the outlook for dividends. Corporations continue to hoard cash, because they too feel the uncertainty in their operations. So why invest in new plant equipment or employees when the global picture is so cloudy? And even if dividend payments aren’t going up, there is so much cash on corporate balance sheets that most large-cap companies are assured of continued dividend rates through the worst of recessions.

Because expectations for corporate profits are falling, so are expectations for increased dividends. Even though corporations can afford it, we’re likely to see fewer companies raising their dividends to shareholders, particularly if general economic growth remains weak. You know you’re in tough times when the stock market goes up after second-quarter economic growth is reported at 1.5% on an annualized basis.

Dividends have been a stock market investor’s best friend for the last decade, and if you think the U.S. economy will toy … Read More

Why Getting the Business Cycle Right Is the Only Thing That Pays

By for Profit Confidential

dividend paymentTwo decades ago, everyone was making money from the stock market. There was a boom, and some of the best stocks were in the technology sector, mostly due to the proliferation of the Internet. You didn’t even need to own the best stocks; just owning the index was a profitable investment strategy. Then, the best stocks and the rest of the market came apart, because valuations got too extreme for the amount of earnings being generated. Many companies in the technology sector are still today recovering from the stock market bubble that burst.

Take Intel Corporation (NASDAQ/INTC), for example. This company is still growing its revenues and earnings, but what used to be one of the market’s best stocks turned out to be a big dud. The company’s stock price hasn’t done anything for years. In fact, Intel’s stock market price on a split-adjusted basis is the same now as it was in November 1998. That’s 13 1/2 years of dividend payments, but no bankable capital appreciation for long-term holders of the shares.

Another company with a similar story is Cisco Systems, Inc. (NASDAQ/CSCO), which is now trading at the same split-adjusted price as in October 2008. Even if the company’s dividend payments covered the inflation rate, if you still owned the stock from that time, you wouldn’t have made a dime.

The notion that long-term investing in the stock market is the only way to go is a total bust as far as I’m concerned. Long-term investing works—but only if you own the right businesses at the right time during the business cycle. Things happen; industries change and … Read More

The Blue-chips Hitting New All-time
Highs in Spite of Market Correction

By for Profit Confidential

stock marketThere is a number of large-cap, blue-chip companies in the stock market that are actually trading right at their 52-week highs. In fact, some are trading at their all-time price highs and many of these shares aren’t overpriced.

Consider for example, Colgate-Palmolive Company (NYSE/CL), which was a favorite of mine way back when I was a stockbroker. This blue-chip company is the maker of such well-known brands as “Colgate” toothpaste, “Palmolive” dish soap, “Irish Spring” hand soap, and “Toms of Maine,” to name a few. This stock has been an enormous wealth creator over time, ignoring virtually all of the major shocks to the rest of the stock market. The stock went up substantially in the big run-up of the 1990s, went flat in 2000 for about six years, and then doubled again to its current record level of around $100.00 a share. And this doesn’t include all those quarterly dividend payments.

Then there’s Kimberley-Clark Corporation (NYSE/KMB), another blue-chip company that manufactures “Kleenex,” “Cottonelle” and “Kotex” brands, along with a ton of personal and other products that you’ve never heard of. This stock has almost doubled from the stock market low in 2009 and the company’s current dividend yield is a hefty 3.7%. Even since last summer, this position has accelerated substantially more than the broader stock market, and it is now sitting right at its all-time high of around $80.00 a share.

Finally, another blue-chip company I’d like to highlight is Kraft Foods Inc. (NYSE/KFT), which currently has a dividend yield of about three percent. This stock has basically doubled in value since 2009, which is pretty impressive … Read More

Bank Stocks: Is it Safe to Buy Them Now?

By for Profit Confidential

The big banks have steadily recovered since the Lehman Brothers collapse in late 2008 that sent bank stocks in a punishing downward spiral, which inevitably required hundreds of billions of dollars in bailout funds from Uncle Sam to save the U.S. banks from collapse.

In my view, this chaotic event was an opportunity that may surface only a few times and times of chaos are when you could make big money.

What was clear was that the newly minted President Obama couldn’t allow the big banks to fail even though they were responsible for the subprime mortgage and credit crisis around the world. If the big banks collapsed, this would have likely triggered a mass selloff in the U.S. and thrown the U.S. economy into a depression instead of a recession. The housing market is showing signs of improvement in spite of continued price pressures, which you can read about in U.S. Housing Market: Anatomy of a Recovery.

There was absolutely no way the government would allow the big banks such as Bank of America Corporation (NYSE/BAC) and Citigroup Inc. (NYSE/C) to fail, as it would drive down banking competition nationwide, which would not be good for competition and confidence in the U.S. banking system.

The concept of chaos generally provides a great opportunity to make some easy money. On March 5, 2009, Citigroup could have been bought for $1.02 a share. The stock is currently trading at a post-consolidation price of $36.78 after a 10-for-1 stock adjustment. A block of 100,000 shares could have made you a cool $266,000 in two years. Citigroup was trading at over $52.00 … Read More

The Stock Market & Oil Prices: A Dangerous Duo

By for Profit Confidential

 investor sentimentIt really is the perfect environment for higher oil prices, which is both good and bad for the U.S. economy. Higher oil prices reflect a better economic outlook, as speculators bet on better gross domestic product (GDP) growth in the U.S. market. This translates right into the stock market. But, as we all know, higher oil prices also mean higher gasoline prices…and this is inflationary and cuts into consumers’ incomes.

There is a slight premium in oil prices today related to tensions with Iran. It’s not a big premium, but my best guess is that it might be around $5.00 a barrel. The stock market certainly isn’t worried about higher oil prices right now; equities have too much support from the Federal Reserve to be concerned. Stock market investors are buying because of unprecedented monetary stability and the hope for better corporate visibility. Oil prices are going up because of demand and supply, coupled with some speculative fervor.

The big news in the stock market continues to be with large-caps, especially within the technology sector. As a group, I think technology is a little ahead of itself. Things just aren’t that rosy yet. But, with stock market valuations still very fair, positive investor sentiment is behind the big push. Institutional investors (like individuals) don’t have much choice out there in the investment landscape. Bonds and cash don’t pay anything and the real estate market is a bigger gamble than dividend payments.

Chatter in the investment world is toying with the possibility of oil prices heading to around $125.00 a barrel in the not-too-distant future. (See Why Oil Prices, Gold Read More

With Emerging Market Slowing,
Corporate Earnings Are the Key

By for Profit Confidential

dividend paymentsIt’s my contention that the stock market is engaging in a slow process of topping out. The stock market usually likes to lead the economy and, while corporate earnings have been surprisingly strong ever since the financial crisis, this has mainly been due to growth in emerging economies. Now these economies are slowing after many years of solid expansion.

The BRIC countries along with all of Asia have been the saving grace forU.S.large-cap companies. With little growth to be had in the domestic economy, their corporate earnings have been padded by international operations. And this is the worry I have: corporate earnings growth. With emerging economies now slowing (especially in China) and virtually zero growth in Europe,U.S.corporate earnings are going to have a tough time achieving double-digit growth over the next several years. My expectation is a material slowdown in corporate earnings starting perhaps this year or in 2013, which will definitely affect the prospects for the stock market.

It is certainly possible that the U.S.economy could accelerate on its own this year. The Federal Reserve (for better or for worse) has pretty much done everything a central bank can do to try and re-inflate the economy and the stock market. (See What Could Ensure a Good Stock Market Performance This Year.) The unprecedented low-interest-rate environment is extremely helpful for corporations, with debt financing very affordable. It’s also helpful for homeowners and mortgage seekers. With encouraging signs on the employment front, the housing market should also show some improvement in the near future. But the big question is: will it be enough to satisfy the stock market? We’ll find … Read More

It’s Full Steam Ahead for Stocks…if There’s No War

By for Profit Confidential

dividend paying stocksIn terms of a base, I would consider the stock market to be in good shape if the S&P 500 Index can hold 1,350. It’s been doing so for about a month now and you can’t say that stocks haven’t been due for a small correction—the market’s run up solidly since the beginning of the year.

The NASDAQ’s been the real star of the show so far and my best guess is that the stock market will soon start another upward leg, around the beginning of first-quarter earnings season. That is of course, if there’s no war with Iran, Syria, or Greek bondholders.

There have been a lot of announcements lately about increased dividends and this was expected. Increased dividends are like free gifts for shareholders and I think it’s very reasonable to expect more dividends announcements from the best large-cap companies in the market. Even though the NASDAQ is outperforming now (which is good leadership for the rest of the stock market), dividends income has been and will continue to be the best investment strategy for equity investors in a slow growth environment. The stock market’s been in a bear market since the technology bubble burst in early 2000. Without dividends income, index investors would still be below water. With all the risks out there and the new age of austerity, the best investment play is dividend paying stocks for those not wanting to sit on cash.

There was a time when I wasn’t that keen on dividend paying blue-chips. Not to their exclusion, but during the technology sector boom, the information technology revolution combined with the Internet provided … Read More

Another Bullish Sign: More Announcements
of Increased Dividend Payments

By for Profit Confidential

economic newsIf you haven’t heard already, dividend payments are going up. A number of large-cap companies recently announced dividend increases and it’s another positive trend for the stock market. We’ve got low-interest-rate certainty, improving economic news and stock market leadership from the technology sector. This is a good recipe for higher share prices. Let’s enjoy it while it lasts.

 I think it’s fair to assume that dividend payments are going to keep rising this year; corporations have to put their excess cash somewhere. We are seeing some increased spending from corporations on new plant and equipment, but it isn’t robust. Just like individual investors, large-cap companies are reticent about making big bets in the U.S. and abroad. The uncertainty in the global economy is still a major factor in the huge cash hoard that corporations have accumulated.

 But, this reluctance to invest in new fixed costs has produced very healthy balance sheets. If a company invests millions into new plant and equipment and there’s another recession (which is likely), shareholders will be angry. So, instead, corporations have an incentive to return all their excess cash in the form of dividend payments. (See Must-haves for Your Stock Market Portfolio.) As we know, dividend payments always make shareholders investors happy.

 The stock market right now is due for correction, but it also has some decent underlying strength. The news lately has been good: upwardly revised gross domestic product (GDP) in the fourth quarter, fewer jobless claims, and companies announcing higher dividend payments. The only weak economic news recently was in durable goods orders and this can always be a one-period anomaly. The … Read More

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.