Despite the uncertainty gripping investors in Europe, the U.S. markets closed the week with one of its biggest one-week gains so far in 2012.
Looking at today’s headlines, McDonald’s (MCD) shares ended lower following the company’s second consecutive disappointing monthly sales update. This news hurt shares of competitor Yum Brands (YUM) as well. Elsewhere, investors were looking positively on HMO plays Wellpoint Inc. (WLP) and Aetna (AET) as election year implications start to be explored. In my opinion, it’s way too early to make election-centric bets. There are too many moving parts, and opinions can cause wild share price gyrations.
Once again, Wal-Mart Stores (WMT) acted as a safe haven, despite its somewhat unattractive dividend yield. Also, Wall Street analyst upgrades had shares of W.W. Grainger (GWW) and SunTrust Banks (STI) tacking on gains. Other dividend names gaining nicely today, also included Target (TGT), Coach (COH), and Capital One Financial (COF).
For our full coverage on these stories and more, be sure to visit The Dividend Daily, which is chock full of dividend-centric articles.Dividend Stock Removed from Recommended List
We removed another dividend stock from our Best Dividend Stocks List this morning. We still like the name, but would wait to add new money to the shares for now. Check out the name we downgraded along with a full explanation here.Saving is a Virtue to Embrace
The majority of people in our American society place very little priority on saving money. These folks prefer instead to spend every dime they earn on material possessions. They live in the “now,” rather than looking toward the future.
Unlike savings trends in European countries such as Germany, France, Austria and Belgium, which have all seen household saving rates hover between 10 and 13 percent for the past three decades, Americans barely save any money at all. In fact, the savings rate in the U.S. dropped to nearly zero by 2005. The rate then rose above 5 percent following the 2008 financial crisis, but has recently fallen back below 4 percent.
Because Americans can borrow money with relative ease, the U.S. has adopted a mindset that endless consumption — regardless of potential repercussions — is good for the economy. While this approach has certainly fueled America’s growth over the past few decades, I believe the rubber band will eventually snap.
While the government can put together temporary patchwork fixes to avoid “paying the piper” so to speak (i.e. printing money), individuals don’t have the same luxury. Declaring personal bankruptcy is still an option for those who dig too deep a hole, but the world is changing. Lenders are becoming less and less willing to overlook past money discrepancies. And although we’ve heard some recent chatter about governmental incentive programs to help individuals better prepare for their later years, I’m sure you’ll agree that waiting for Washington to rescue you is a real long shot.
Meanwhile, people have unlimited tools at their disposal to improve their finances themselves. Working to eliminate debt (especially high interest loans like credit cards) is a great initial step. Financial accountability also means focusing a bit more on budgeting your money. Prioritize your expenses to first account for your main fixed costs (rent, mortgage, food, insurance, etc.) before doing any extra spending (clothes, dinner, movies, etc.). This practice makes a ton of sense, and I think also will teach you some self-discipline.
Building wealth also requires you to set aside funds and invest them in income-producing assets. Dividend investing is our immediate focus, but you can also invest in a personal business, or even look into positive cash-flow real estate as another potential money-maker.
Dividend investing does not require a special talent, education level, years of experience, luck, or much money either. It simply requires a commitment from you as an investor that to keep consistently put money to work in the best ideas available (that would be from our Best Dividend Stocks List). It’s that simple!Leaving Money out on the Street
I recently read an interesting article in the Wall Street Journal about how companies are taking longer to pay their outstanding invoices. The latest data shows up to 64% of the 850 small businesses surveyed last year (source: National Federation of Independent Business) reported having invoices that went unpaid for at least 60 days, and 20% said delinquencies were getting worse. These invoices are for companies mostly with annual sales of less than $5 million.
A study released in May by Experian, a global information-services company, found that businesses earlier this spring were paying bills an average of 7.6 days past due, a 14.1% increase from the same period last year. Of nearly 5,000 small businesses, 14% cited late payments as their biggest business challenge in 2010, up from 2% in 2008, according to the latest available data in an ongoing study by the Kauffman Foundation of U.S. start-ups.
Why are these data points important? Because they relate directly to jobs. The longer companies take to get paid, the harder it is for them to feel good about expansion possibilities. Lines of credit are getting tighter and tighter, so business owners are having more difficulties making payroll. This trend is not a good one as far as economic activity is concerned. For investors, it may be a case of focusing on larger-cap companies who may be using the delay in payments to their advantage (trust me, it’s not a strategy I love to see, but it is happening). Larger companies also have better leverage with financial institutions and can negotiate better rates.
Finally, here’s a quick side note. A friend of mine owns a pest control business (mostly commercial clients) and I ran into him a few months back. The first thing he said to me is how much money he has “out on the street” (meaning unpaid invoices). I’m sure the last thing he is thinking about is hiring new people, when people all over town are dragging their feet on paying him.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 continue to be a non-factor with few companies reporting. The focus will likely be on the economic data as well as the latest Wall Street analyst calls.
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.