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All it took for the markets to get back some of yesterday’s selling was a surprise earnings beat from Dow component Alcoa (AA). The markets in Europe were higher as well.
With the markets suffering their first major losing streak of 2012 (down for 5 consecutive sessions), traders were certainly looking for an oversold bounce. It will be interesting to see how the market reacts when other key companies begin reporting in the coming days and weeks. Momentum traders need to be very careful, as any bit of a letdown can cause havoc to a trader’s portfolio. Dividend investors could see some new names come on to our radar if the markets overreact on the negative side to upcoming earnings reports. Likewise, we are evaluating our current recommendations for any potential move to the sidelines in some of them.
Elsewhere, Wall Street analyst upgrades helped boost stocks like Boeing (BA), BB&T (BBT), Las Vegas Sands (LVS), and United Technologies (UTX) in today’s early pop. On the flipside, bad earnings-related forecasts out of Nokia (NOK) (read more) and Computer Sciences (CSC) (more here) had those two companies struggling amid today’s rally.Bullish 1st Quarter for Dividends
Standard & Poors just put out some positive statistics from its first quarter dividend tally:
- The value of net dividend enhancements (increases less decreases) skyrocketed 27.6%, to a record $24.2 billion from $19 billion in 2011′s opening quarter.
- S&P counted 677 payout hikes, extras, and resumptions, up 32.7% from 510 during the corresponding 2011 stretch.
- Dividend cuts and omissions, at 31, were flat with a year earlier.
- Payout ratios (dividends as a percentage of earnings), which historically average 52%, remain close to their lows, at under 30%. (This fact certainly shows companies have room to keep raising payouts as corporate cash levels continue to grow).Financial Institutions Back to Their Old (Predatory) Ways
The New York Times had an interesting article out this morning talking about credit card lenders moving back into the sub-prime borrowers’ space. Apparently, recent lessons from the financial bailouts/crisis have already been forgotten.
According to recent data from Equifax, credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3 percent from the same month a year earlier. These borrowers accounted for 23 percent of new auto loans in the fourth quarter of 2011, up from 17 percent in the same period of 2009.
The problem with the sub-prime space is that those risky borrowers almost never say “no” when lenders are willing to finance a purchase. Far too many people have a habitual need to have “stuff” — usually the newest and priciest they can buy. Hence, the debt spiral continues until folks collapse under the weight of bills they can’t afford. In response, lenders begin to cry for help. The next thing you know, here comes the Federal Reserve with yet another financial institution rescue package in hand, courtesy of the American taxpayer.
This ugly cycle almost always begins and ends the same way. Is this sort of financial activity indicative of a healthy economy? I think we all know the answer to that.Eliminating the Competition: Facebook-Style
The media is abuzz about Facebook’s just-announced acquisition of photo-sharing app company Instagram for $1 billion. The price tag shocked many who can’t believe the company (Instagram) was not generating any revenue (yes, zero revenue), but had 30 million users and counting. You see, the big theme right now on Wall Street is social media and mobile apps. Sharing photos is a huge part of this equation, with as much of two-thirds of users’ activity on Facebook dedicated to interacting with photos.
So, many analysts believe Facebook needed to make acquisition, if only to eliminate a potential threat to its business. Don’t be surprised to see many more threats pop up along the way, as scores of highly-funded VC-backed startups are still in line on the investment hype runway.
The most bullish onlookers say that Facebook’s Instagram purchase reminds them of Google’s $1.65 billion all-stock acquisition of YouTube back in 2006. At the time, YouTube had essentially zero revenue. Since then, Google has been successful in monetizing the service with ads. For Facebook, monetizing Instagram won’t be so easy.
In the end, will the move make sense? For the VC’s and founders of Instagram, the deal is a no-brainer. But at some point, profits and revenue will be the ultimate measuring stick.17 Money Mistakes People Make (Part 2)
Continuing yesterday’s list of common money excuses, with my response to them below…
Excuse #7 – “Old cars just aren’t safe.”
My Response: This is where having a good and trusting mechanic can pay big dividends (pun intended). Stay up on your regular oil & filter changes. State inspection regulations have become less strict so more cars are passing, but don’t let this fool you into thinking you can skip car maintenance. Leasing cars is a great win for car dealers, but generally not for most consumers.
Excuse #8 – “I’ll start my budget next month.”
My Response: Procrastination is a big enemy of the investor. The “budget” word may not be too sexy, but there are great sites out there today that make the task a bit less of a drag. Mint.com is one of the more popular places to check out.
Excuse #9 – “I work hard so I deserve to have it!”
My Response: Nothing wrong with that. Just work a bit harder if you want the finest things in life and make sure you are earning enough money that the spending doesn’t create a big hole.
Excuse #10 – “I want my kids to have it better than I did.”
My Response: When it comes to education, definitely. But other material things are just that and will not make your kids love you more. Ask most any parent and they will agree.
Excuse #11 – “It’s cheaper to eat out than eat at home.”
My Response: The better answer may be that is is much more fun to eat out, but certainly not cheaper in most cases. There’s nothing wrong with learning to work your way around a kitchen or even reach for a box of cereal or TV dinner once in a while if time constraints kick in.
Excuse #12 – “I’ll save next year when I’m making more money.”
My Response: There is no better time to start saving/investing than when you actually have a job. For many, this excuse can be the most deadliest when it comes to building wealth. Everyone knows the older you get, the more expenses you incur (getting married, having kids, vacations, cars, etc.).An Important Note Regarding the Best Dividend Stocks List
We want to make sure everyone understands that the stocks on our Best Dividend Stocks List are the names we currently like for new investor capital, regardless of what date the stock was first recommended on. If and when a stock is removed from the list, we will clearly state whether the stock should be sold (which is rare but occasionally will happen), or simply held in one’s account until we see a better entry point or catalyst.
And here’s one last thing to remember about what we do here at Dividend.com: it’s not just the names that we recommend that can help you build wealth, but also the things we try to steer you away from that are just as important. Forget about speculative or penny stocks, chasing unprofitable IPOs, and listening to the manic talking heads in the business media!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 Dividend Capture Strategy for Active Investors
We now offer complete U.S. dividend data for all Dividend.com Premium members, so anyone that focuses on “Dividend Capture” trading strategies should have plenty of good stuff to research each day. Just check our enhanced Ex-Dividend Calendar, which is the best in the business, to search for upcoming payouts.
Speaking of dividend capture, Dividend.com Premium members can also access a 9-page report we published on the essential elements to any successful dividend capture strategy. Be sure to check it out here on the Premium homepage.
Thanks for reading everybody. I’ll see you tomorrow!