The market wrapped up another solid week of gains following the busiest earnings week of the first quarter.
Looking at today’s headline names, Expedia (EXPE) was off to the races following their blowout earnings report. Higher-beta names pushed higher well, with traders trying to score profits with the likes of Wynn Resorts (WYNN), Cummins Inc. (CMI), and CF Industries (CF). Getting back to the earnings side, there was some selling following results from companies such as Starbucks (SBUX), KLA-Tencor (KLAC), and Republic Services (RSG).
I was watching some of the annual NFL Draft last night (in between watching the NHL’s Rangers pull out a game 7 win over the Ottawa Senators), and the football analysts kept hammering home a constant theme regarding several of the top-tier players selected in the first round. The analysts were concerned about some players’ “motor,” referring to their ability to run at full steam on each and every play. Any question of a player taking plays off makes their stock drop very quickly, and a player’s “motor” tends to be a good gauge of how well he’ll adapt to the NFL.
In real life, our own “motors” are also good indicators of how well we’ll perform from a professional/career standpoint. Some people are easily distracted, which limits their production considerably. Others are just far more concerned about leisure than work. Still others just don’t seem to have any ambition to improve their lot in life. I’ve personally been around many individuals, particularly early in my working years, who simply showed up at work each day to collect a paycheck.
I can guarantee you this: if you have a motor (competitive drive) that doesn’t stop, you will find success in your life, both personally and professionally. A willingness to work hard and solve problems can often make up for other shortcomings. One thing you want to avoid is to be considered a “bust” — a talented individual who fails to capitalize on their competitive advantages.
You can bet some of the players chosen last night in the NFL draft will fail to live up to the hype, but whether they succeed or not is entirely up to them. My advice? Keep your motor running and success will follow.The Wonders of Compound Interest
Everyone knows I keep pounding home the message of dividend investing and compound interest. The long-term benefits are enormous even if you have minimal capital to get started. Let’s highlight some examples below to illustrate the power of dividend stocks.
Investor #1 starts investing $5k a year at age 25 and does so for 40 years ($200K total invested) in Bank CDs, money markets, etc. averaging 3% a year. After 40 years, this person’s nest egg becomes worth just over $652K.
Investor #2 starts investing just over $4K a year at age 45 and does so for 20 years ($81K total invested) in dividend-paying stocks that historically average an 11% annual return, this person’s nest egg becomes worth over $653K.
Investors #3 starts investing $5K a year at age 55 and does so for 20 years ($100K total invested) in dividend-paying stocks that historically average an 11% annual return, this person’s nest egg becomes worth over $806K.
As you can see, compound interest is a very strong force when it comes to putting money to work over a period of time. Also, you will notice the danger of being too conservative with your money (as Investor #1 was). They had the right idea is starting young, but they chose too conservative an investment road. Lastly, you see that age is not really a factor when it comes to being invested properly. This example should inspire many individuals who make the mistake of thinking it’s too late to make a difference for your retirement.
Starting as early as possible, staying with a discipline to keep putting your money to work, being patient and not touching the money is critical. Maxing out your contributions each year for your IRA’s and 401K plans (if your employer matches) is vital.
There was a great snippet in this past year’s annual shareholder letter from Warren Buffett. Get this, in the next 10 years, Berkshire Hathaway will start collecting more annually in dividend payouts per year from Coca-Cola (KO) than what was their original investment. Granted, Warren Buffett owns nearly 9% of the outstanding shares of Coca-Cola, it still reminds us all how incredible compound interest is when it comes to building wealth. I couldn’t venture to guess what the annual yield of his investment produces, but you can bet it is certainly way into double-digits (not including any stock price appreciation!).Our Beat The Markets with Dividend Stocks eBook Has Arrived!
We just debuted our brand new 275-page eBook, exclusively on Dividend.com! In this digital-only book, we look ahead to 2012 and the main factors that could affect dividend investors. A $39.95 value, the eBook is a free download for paid Dividend.com Premium subscribers.
Beat The Markets with Dividend Stocks contains a full economic forecast for 2012, including in-depth analysis on 65 of the biggest dividend stocks out there. It’s a great way to get prepared for your investing next year! So head over to the Dividend.com Premium homepage now to download your copy.A Look to Next Week and a Weekend Preview
Looking ahead to next week, earnings will pick up significantly, with reports from the likes of Kraft Foods (KFT), Pfizer (PFE), Time Warner (TWX), and Allstate (ALL), just to name a few.
Be sure to catch up with our latest watchlist updates this weekend on Dividend.com Premium, including reports on earnings/story stocks, analyst upgrades/downgrades, dividend ETFs, and much more. And as always, you can view our current recommendations on our industry-leading Best Dividend Stocks List.
Thanks for reading, and I’ll see you this weekend! P.S. Please pass this e-mail on to someone you think can use some financial motivation as well as being kept in the financial news loop that could affect them.