7 Dividend Stocks to Prove Buy-and-Hold Isn't Dead 44 comments
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Driven by computers that cost more than the average person will earn in their lifetime the investment markets move at light speed. To keep pace hedge funds, mutual funds, institutional investors and multi-billion dollar money managers spend large sums of money on high-tech tools to give them an edge. Throw in some illegal insider trading from big names in the industry and it leaves you wondering what chance does a small individual investor have?
Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules. In a recent Wall Street Journal article, Jason Zweig noted that:
From the point of view of an investor, all this frantic trading is just noise. In 1976, the great financial analyst Benjamin Graham declared that “the stock market resembles a huge laundry in which institutions take in large blocks of each other’s washing … without rhyme or reason.” Mr. Graham died that year, but today he would laugh at the speed of the spin cycle. He would then ignore the momentary vibrations in a company’s stock price and go right back to analyzing the value of its business.
As an investor, you are free to choose your own time horizon. If other people want to try earning a few fractions of a penny a few thousand times a day, you should wish them well — and refuse to join them.
Contrary to what many are now saying, buy-and-hold and investing in quality blue chip stocks is not dead. Consider the following stocks:
Abbott Laboratories (ABT) is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics. The company has a strong new product pipeline, with possible significant launches in both the medical device and pharmaceutical areas. ABT has increased its dividend for the last 37 years and the stock is currently yielding 3.10%. See the most recent Analysis.
Emerson Electric Co. (EMR) primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. The company has a strong competitive position in several major product categories. EMR has increased its dividend for the last 52 years and the stock is currently yielding 3.20%. See the most recent Analysis.
Johnson & Johnson (JNJ) engages in the manufacture and sale of various products in the health care field worldwide. The company enjoys competitive advantages and has products that are largely immune from economic cycles. JNJ has increased its dividend for the last 47 years and the stock is currently yielding 3.20%. See the most recent Analysis.
3M Co. (MMM) is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications. The company has a leading position in many of the markets it serves and a strong balance sheet with a relatively little debt. MMM has increased its dividend for the last 51 years and the stock is currently yielding 2.71%. See the most recent Analysis.
PepsiCo, Inc. (PEP) is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The company enjoys relatively stable end markets, strong cash flows, leading global market positions and trend-setting product innovations. PEP has increased its dividend for the last 37 years and the stock is currently yielding 2.87%. See the most recent Analysis.
SYSCO Corporation (SYY), through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. The company operates in a relatively stable industry, in which it has the largest market share. SYY has increased its dividend for the last 39 years and the stock is currently yielding 3.57%. See the most recent Analysis.
Wal-Mart Stores, Inc. (WMT) is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam’s Club, and International. The company enjoys dominant market share positions, price leadership and strong cash flows. WMT has increased its dividend for the last 35 years and the stock is currently yielding 2.13%. See the most recent Analysis.
If your goal is to build an ever-increasing revenue stream from income investments, the above seven dividend stocks will give your income a boost over time. The key is to wait for the right entry point and let time take care of the rest.
Full Disclosure: Long ABT, EMR, JNJ, MMM, PEP, SYY, WMT. See a list of all my income holdings here.
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This article has 44 comments:
One should however implement a sound buy and hold strategy that works for them and this strategy should include sound diversification, dollar cost averaging and selective dividend reinvestment. Consistent Dividend growth should be supported by sustainable earnings growth over time as well.
Buy and hold investors should also have an exit plan in case things don't go as expected. For me, when a company which has raised distributions for over a decade starts cutting dividends I exit the position and moce my business in more promising candidates.
I have seen so many "Buy and Hold is Dead!" headlines in the last 6-12 months, it's almost nauseating. If everybody listens to the media, volatility would spike, and all the smart buy and hold investors would just buy the good companies when the price is on the down swing.
What about IBM that had and adjustment period is now providing again a good dividend and a 60% value increase?
Rgds.
On Nov 11 04:57 PM Dividend Growth Investor wrote:
> Buy and hold is not dead. It never was and never will. Any advisor
> that recommends that you switch in and out of stocks frequently is
> only after your money either in terms of selling you subscription
> services, charging you money for handling your investments or charging
> you for trades ( brokers).
>
> One should however implement a sound buy and hold strategy that works
> for them and this strategy should include sound diversification,
> dollar cost averaging and selective dividend reinvestment. Consistent
> Dividend growth should be supported by sustainable earnings growth
> over time as well.
>
> Buy and hold investors should also have an exit plan in case things
> don't go as expected. For me, when a company which has raised distributions
> for over a decade starts cutting dividends I exit the position and
> moce my business in more promising candidates.
On Nov 11 07:31 PM Advill wrote:
> Using this reasoning which is your position with companies like GE
> or others similar that after 50 years had a bump for a year or two
> and then starts their dividends?
>
> What about IBM that had and adjustment period is now providing again
> a good dividend and a 60% value increase?
>
> Rgds.
>
> On Nov 11 04:57 PM Dividend Growth Investor wrote:
You get the benefit of dividends (www.planbeconomics.com.../), plus you get exposure to global growth and and inflation hedge.
In reality, an investor's choices are not binary like that. There are lots of in-between points on the spectrum, and dividend investing is a good example. One premise of dividend investing is that the dividends will rise over time, outpacing inflation. Another is that if you don't need the money right now (as a retiree might), re-investing the dividends accelerates the compounding effect. Those premises, however, do not lead to the conclusion that once you start this "cash machine" in motion, you can just let it run--buy and hold. There's a little more involved.
As has been pointed out, some stocks change course and cut their dividends. That violates one of the basic premises (that dividends will keep rising). So the astute dividend investor has a strategy to deal with those cuts, which may be as simple as "sell any stock that cuts its dividend."
Thus, in a good dividend strategy, you will probably not hold everything you buy "forever," so it may be misleading to call it "buy-and-hold." It's more than a semantic difference, because bad labels sometimes cause people to make bad decisions. A better label is buy-and-monitor. Twice a year or so, I conduct a Portfolio Review. Each stock has to "prove" why it deserves to remain. A stock may be dropped because it cut its dividend, or if it is obvious that its proceeds could be put to better use in another stock that fits the profile even better. If zero-cost-basis is your goal, a portion of a profitable position may be sold to achieve that
Bottom line: There will be far less trading in a dividend strategy, but there will be some. Don't get fooled by false labels. Follow sound practices instead.
I buy & hold good div plays in the IRA only and spec in the other, but also hold div plays in both. I have a good deal of GE, that has not been a good play YET but it is a long term play, in 5+ years I think most everyone can say it will be UP. 3M (MMM) , FCX, HON, are good div plays (though all are up a lot at this point so be careful on these) I was trying to pick up more HON and set price missed last week by about a nickel :( now up 3+ over that set price I had.)
I had ABB for a long term, the DIV is not the greatest and you have foreign taxes that rob a good bit of it.
I have some pretty good energy stocks that are down enough to buy & hold that are still paying good DIV, (NI, DUK) are MY 2 biggest holdings in utilities, as prices came down I picked up more. If you look into their actual business models these 2 companies are not just drillers/producers, they transport, and sell to end users. Both have rather nice boosts in end user costs in the pipelines ok to pass higher rate hikes on to the consumers all ok by the gov. this means that they (NI & DUK) should be starting to boost profits and hence will boost their stock prices and maybe boost their DIV as well.
not a buy & hold for DIV is below.
Watching around the area that seems interesting at this point is Shipping (FRO, FST, GMR, DRYS & EGLE) have been clobbered enough to buy & hold for medium to long term, though most held or stopped the divs, that is OK as these will increase in price 20~60% in next couple years pretty easy. (I didnt mention some shippers doing better as they have run up in last few days enough to stay away.)
Mark
Because how long one "holds" is up for interpretation (does it mean 3 mos? 6 mos? 2 yrs? a lifetime?), B&H will never be dead. But is it wise counsel to RIGHT NOW buy in this market, then hold? Not if you are buying right now, when we are on the precipice of a potential market fallout!
The better way to implement B&H is to BW&H - or, "Buy WELL and Hold". I learned this the hard way by buying GE at $27.00, then watching it plummet and not selling in Nov. Sure, I've DCA'd, but I'm still at a 30% loss with this holding. Now I have no choice to hold, unless I want to sell at a significant loss.
So, yes, B&H is not dead, but wiser is the person who knows when to buy, so that one does not take a loss on the hold, and has the option to sell for profit if need be.
On Nov 11 10:05 PM mbkelly75 wrote:
> I had been a long-term holder of GE (long enough to have a zero-cost
> basis in them), but when they cut their dividend - I sold out of
> it. They dropped way down very quickly. They got so low that they
> started looking attractive again and I bought back in for $6.75 (less
> than a fourth of what I had sold them for). I rode the stock back
> up to $11.00 and sold enough to give me a zero cost-basis again after
> all expenses. I ended up with more stock than I had before and still
> had a zero cost-basis. I never thought the company was broken - but
> the stock was. I moved them back into my Core Portfolio, but normally
> a stock does not go into that portfolio until it has a minimum 5
> years of RAISING their dividend. I may move them back into the Exploration
> Portfolio until they once again qualify for the Core, but in either
> portfolio, I will cheerfully collect that dividend while they either
> keep it the same for a while or start raising it again. The company
> is still a good company.
The question is how many companies one person who is not in the finance business can really follow close enough to keep track of? For me it is less than 10. In reality, I think diversification is over rated, but I realize it gives folks a modicum of respite from the stress of equity variance. For me, I go with Bufett's thinking that why would you want to invest in your 25th best company instead of your 1st.
George.
On Nov 12 10:28 AM User 372459 wrote:
> Those are minuscules returns, you have way overlooked Altria (MO)
> they have more money than God. Over 7% dividend, are you boycotting
> the company because they manufacturing cigarettes and shooting your
> self in the foot? If this game is about money say it as it is and
> don't tell me that you don't follow MO.
> George.
Great advice!
I have a real dividend portfolio that I display to the public. The portfolio was created in 2002, and it became exclusively focused on dividends in 2007. It's not meant as a "model," but as a real-time, real-money demonstration of what someone can do who follows a dividend growth strategy. You can see it here: www.sensiblestocks.com... . Use links from there to see the strategy itself, a recent Portfolio Review, a Q&A on dividend investing, etc. They are all free.
Dave
On Nov 12 12:01 PM Innocex wrote:
> I am curious about this blue chip increasing dividend reinvestment
> plan. It seems like a safe winning bet, but I wonder what kind of
> yearly returns do these strategies generate in bull/bear markets?
> Any good examples?
I was a professional gambler at one point in my long life for quite a few years and I do not mind taking risks. The true secret of wealth building is taking risks correctly. General Patton once said "There is nothing wrong with taking risks, BUT that is quite different from being rash." Success has never been how much money you make - it is how much money you keep. Dividend stocks can outperform "Growth" stocks by as much as 22 to 1 over time. Like Willie Sutton said about banks - I go where the money is - Dividend-Paying stocks that have paid a RISING dividend for a minimum of 5 years. They form my Core Portfolio for that reason - they are where the money is over the long term.
On Nov 12 09:56 AM Dave Shafer wrote:
> With all due respect, those buy-and-hold is dead headlines are really
> referring to buy-and-hold mutual fund investing, which I agree should
> be dead. Ironic, that you use a quote from a mutual fund buy-and-hold
> shrill [Zweig] for this excellent post.
>
> The question is how many companies one person who is not in the finance
> business can really follow close enough to keep track of? For me
> it is less than 10. In reality, I think diversification is over
> rated, but I realize it gives folks a modicum of respite from the
> stress of equity variance. For me, I go with Bufett's thinking that
> why would you want to invest in your 25th best company instead of
> your 1st.
However the key is not what company you are buying but at what price you are getting them at
One of these stocks is priced good and 3 others IMO are good companies but priced a bit high here and there are much better places to put your cash
Buyinga nd holding is not dead for those who know how to pick stocks
Stick to your plan and you will succeed,i know its possible because it happened to me.peace
On Nov 12 03:18 PM dividend_growth wrote:
> I'm wondering why you don't have any tobacco or big pharma stocks.
"Buy, hold and watch like a hawk" is better.
America is full of sr citizens who "bought and held GM"
This is not to say that DRIPS cannot be a useful way to invest, if you are strictly a dividend only investor and have capital appreciation as secondary in importance.
On Nov 12 12:01 PM Innocex wrote:
> I am curious about this blue chip increasing dividend reinvestment
> plan. It seems like a safe winning bet, but I wonder what kind of
> yearly returns do these strategies generate in bull/bear markets?
> Any good examples?
Also worthwhile are international exchange-traded bonds which are taxable at only 15%. Many yield over 10%, getting you well over 8% yield after taxes.
On Nov 12 12:06 PM ERCaptain wrote:
> I tell people that when I reach retirement, I am really not that
> interested in bonds for income. I want rising income. Bonds don't
> do that. I don't even care that much about what is happening to
> the stock value behind the scenes as long as the management, earnings,
> dividend are in good shape. Look at the 20 year returns and the
> "rising income" of dividend stocks. It is amazing the yields that
> you get on your original investment if you "BUY AND HOLD" long enough.
>
> Great advice!
On Nov 12 10:28 AM User 372459 wrote:
> Those are minuscules returns, you have way overlooked Altria (MO)
> they have more money than God. Over 7% dividend, are you boycotting
> the company because they manufacturing cigarettes and shooting your
> self in the foot? If this game is about money say it as it is and
> don't tell me that you don't follow MO.
> George.
On Nov 12 05:45 PM ozzzy4444 wrote:
> "Buy and hold" is a bad idea.
> "Buy, hold and watch like a hawk" is better.
>
> America is full of sr citizens who "bought and held GM"
Finanncial independence WILL happen I know because it happened to me
Spring and summer 2009 was good.
AEE closed today @ $25.72 My cost $23.86
AEP closed today @ $31.62 My cost $27.58
MO closed today @ $19.26 My cost $18.46
OKE closed today @ $39.03 My cost $26.62
PEP closed today @ $61.94 My cost $62.32
PGN closed today @ $38.10 My cost $33.89
PNW closed today @ $33.23 My cost $29.16
SCG closed today @ $34.50 My cost $29.90
WIN closed today @ $9.93 My cost $8.87
My yield on OKE is 6.3%. Buyers @ today's price get 4,3%
My yield on PGN is 7.31%. Buyers @ today's price get 6.5%
My yield on PNW is 7.2%. Buyers @ today's price get 6.3%
My yield on SCG is 6.28% Buyers @ today's price get 5.4%.
Sure do wish they'd go back down again. I'm keepin' 'em....unless the dividend from one of them appears to be on shaky ground, I like them.
I am not what I consider overly educated as an investor, but I do not think you can calculate yield without taking into account the dividend. I understand that stocks who provide both growth and dividends over time perform better than just those aimed at growth. I also don't see how you can expect to make money on a company that does not make money unless it is a case of looking for a bigger sucker in the market.
For instance, I know exactly how much in various issues I need to replace the income from my job. At such a point, I would have the option of retiring assuming that I have not allowed my lifestyle expand to consume all of my wages and my dividend income.
...tho I am certain someone with lots of letters at the end of their name will disagree with me on this.
On Nov 11 05:56 PM brentsblog wrote:
> i agree will you buy and hold is not dead but the how can you make
> money in the stock market and never be a sell. at some point you
> have to be a sell and you want to sell when people are buying and
> not when everyone is selling
On Nov 12 08:20 PM YoYoMama wrote:
> AAII.com has a screener that divides dividend stocks into DRIP and
> non-DRIPS. The non-DRIPS have a better yearly average return on
> investment (assuming dividends not reinvested), simply meaning they
> are better performers overall.
>
> This is not to say that DRIPS cannot be a useful way to invest, if
> you are strictly a dividend only investor and have capital appreciation
> as secondary in importance.