The markets pulled back following news that U.S. service companies, which employ roughly 90 percent of the work force, expanded more slowly in April. The data points signify less growth in new orders as well as a slowing in new hires. These points overshadowed better-than-expected jobless claims data, which also came out this morning.
We saw plenty of focus on earnings today, with traders reacting negatively to results from the likes of Visa (V), Prudential (PRU), and Weight Watchers (WTW). On the flip side, investors were buying up the earnings news from insurer Allstate (ALL) as well natural-foods centric supermarket brand Whole Foods (WFM). Despite having a much larger price-to-earnings ratio than its peers and many stocks that trade on the S&P, While Foods’ share price spike is continuing the recent investor “buy the brand you love at any price” mentality with companies they are familiar with. This trend could lead to portfolio underperformance for those buying up shares at the end of a big move.
For all the latest earnings results, be sure to check out The Dividend Daily.Two Dividend Stocks Removed from Recommended ListBank CD Gimmicks Beginning to Ramp Up
Gone are the days of getting a toaster at your local bank just for opening an account. In this era of record low interest rates, banks have turned to bigger gimmicks to lure in customers.
Yesterday I came across one such gimmick that must be seen to be believed (and I quote):
“Trevor Burgess, CEO of Community Bank announced today that, in conjunction with its name change to C1 Bank on May 1st and in partnership with Crown Eurocars, it will be offering a new five year $1,000,000 CD product where the client will receive a brand new Mercedes‐Benz from Crown Eurocars as pre‐paid interest.”
Clients will be able to choose from the 2012 SLK350 Roadster, 2012 E350 Sedan, 2012 ML350 SUV, and 2012 E350 Convertible.
C1 Bank CEO Trevor Burgess said, “C1 Bank is offering its clients the ability to drive off in their own brand new Mercedes‐Benz just for moving their money to C1 Bank. In this interest rate environment where the five year CD has an APY of 1.20% it is thrilling to change the game with the instant gratification of a spectacular Mercedes‐Benz that our client will own including tax, title, and license.”
As for the fine print:
In the event of early withdrawal, C1 Bank will deduct from the $1,000,000.00 principal amount deposited the amount of the pre‐calculated, pre‐paid interest paid in advance and specifically used for a Mercedes‐Benz vehicle purchase from Crown Eurocars Incorporated, including any delivery, tax and costs paid with such interest ($61,294.04). In addition to the early withdrawal penalty, C1 Bank will also deduct an early withdrawal fee of $3,000.00 from the $1,000,000.00 principal amount deposited.
Some of you may be thinking, what’s wrong with getting a new Mercedes? The CD rate is comparable to other 5-year bank CD’s, after all. What’s the catch?
The catch is, your money is locked into super low interest rate for five whole years. This campaign is pretty clever if you ask me: use the smoke screen of a luxury car to lure in high net-worth investors, making them feel OK about subpar results for several years.
Even when the stock market was pulling back dramatically in late 2008/early 2009, smart investors (like our subscribers here at Dividend.com) realized the sell-off was creating amazing bargains for certain blue-chip names. We pinpointed those great buys back then, including recommending Phillip Morris International (PM) below $40 a share and yielding over 5%. Throw in the several dividend raises since then, and you have a stock paying out incredible income just in dividends alone, let alone the stock more than doubling. If and when we get another market pullback, we’ll be on the lookout for places to put our hard-earned capital.
In short, tying your money up for five years, basically at break-even when you factor the taxes you’ll owe, at just over 1% interest, should be of no interest to dividend investors (luxury car and all). My guess is that we’ll continue to see these kinds of gimmicks from banks in the coming weeks and months, as they desperately try to land some of the big money still sitting on the sidelines.The Safest Investment is…
As per the latest Gallup Poll, Gold takes first place as the “safest investment” according to everyday U.S. adults surveyed. A full 28 percent of adults ranked gold as their top choice, down from 34 percent last year. One interesting factoid was Gold was most popular among older Americans, those without a college a degree, and individuals who earned between $30,000 and $75,000 a year. These points are very interesting to me, as the general public tends to hear about manias or crashes once most of the move (up or down) has already occurred.
Am I surprised that so many people still see gold as the safe haven choice? Not really, but the fact that real estate edged out stocks in the survey was a big surprise. What many people don’t realizes is that dividend stocks continue to be the best possible investment vehicle for most folks — as they have been for several decades.
The media has done a great job in getting jittery investors to freeze up and do nothing. This process has been made easier by tumbling real estate prices, which make property owners even more shy with their money. I am not sure the current generation (those under 30 years of age) will have the same gusto for the American dream of owning your own home as generations like mine and those before had. What kind of investment implications will this trend have? The changes will be quite dramatic in my opinion, and we will undoubtedly touch upon this point further in future newsletters.New MLP Report Just Released!
In The Essentials of Investing in MLPs, we outline the do’s and don’ts of investing in high-yield Master Limited Partnerships (MLPs). Our exclusive new MLP report outlines everything you need to know about these popular high-yield investments, including:
- Understanding their unique company structure
- What you absolutely need to know about their special tax treatment
- Why MLPs may not be suitable for retirement accounts
- How to find the best high-yield partnerships
- …and much more!
Head to the Dividend.com Premium page to download this brand new report today!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!