Leif Peterson

10 Dividend Stocks That Are Beating the Bear Market

Great article, keep the good news coming about high dividend yields. (there are other equities that are doing as well or better, and have grown over the last several quarters. Also, please respond if you can on the effect of hyperinflation on earnings and subsequent risk of cutting dividends, and whether it's likely that the Fed will counter hyperinflation by raising interests rates(?). On another note, someone in another forum compared the PFM (dividend ETF) to S&P500 over the last several years and suggested only a 2% comparative increase. First of all, isn't the yield of PFM only 2.81% -- which is low. Hence, they used the PFM/S&P500 ratio as an indicator of how well dividends did.

The Next Bull Market Is 4-8 Months Away

You could sell growth stocks now if you fear another large correction. However, I wouldn't sell dividend stocks for which the companies earnings and dividends are ever-increasing. Such stocks are not the type that you jump out of and get back into because of volatility and herd mentality.

Why You Should Stick With the Dollar and the U.S.

Thanks for the comments. The intent of the article was to contrast the current crises in the US economy with recent history for country with a high literacy rate whose economy acutely dissolved (i.e., "dissolution of the USSR"). By acutely, I mean short-term rather that chronic (long-term) loss of a currency base.

In 2007, data reported by the UN (hdr.undp.org/en/report.../) suggest the literacy rate for the Russian Federation was 99.4% (ranked 11), while for the largest countries in the world the literacy rates were China 90% (ranked 85), India 61% (ranked 147), US 99% (ranked 17), Indonesia 90.4 (ranked 87), Brazil 88.6% (ranked 95). Pakistan 49.9% (ranked 160), and so on.

Because this article is about the US, the only other large country in the world with a similar literacy rate whose economy recently acutely dissolved is the USSR. Japan ranks 10 in the world population and has a 99% literacy rate, but I don't see that the "lost decade" compares to the dissolution of the USSR. Readers may not understand the implications of this. What's interesting is that the economy quickly dissolved in a country (USSR) whose literacy rate was one of the greatest in the world.

Looking at the Human Development Index (DHI, hdr.undp.org/en/statis.../ ), which combines life expectancy, literacy, and standard of living, Japan's ranks 8 in the world, while the US ranks 15, RF ranks 73, China ranks 94, and India ranks 132. Again, in terms of HDI, it's more appropriate to contrast the US with RF(USSR) before China and India if you need to use an example of an economy that quickly dissolved.

As a totally relevant aside, I have been the principal on many joint US-Russian nuclear research projects with Moscow-trained scientists, and have been doing nuclear research in several CIS countries over the last 20 years. Thus, I never really never *compare* the US. vs. RF. If you contrast economies of the US and RF, however, they are fundamentally different. I only used the historical case of the dissolution of the USSR as an example of rapid devaluation of a currency base in a highly literate country.

The Detroit Syndrome of Economic Failure

US Navy Ships Made in Detroit (see www.aviationweek.com/a... )

The High Dividend Stock Investor's Collapsing Dollar Survival Guide, Part 3

Great series of articles - was exactly what I was looking for. Indeed, owning a heavy stake in KMP, MO, PM, KO, PG, JNJ, XOM over the last 10 years and reinvesting dividends would be "ka-chung" right now. With another 10-15 years of work, you would be in hog heaven. Reinvesting dividends is actually exponential growth right in front of your eyes -- however, the focus gets sidetracked on diversification, price hunting, market corrections, sector rotation, etc.

Have you seen the Fed's plan for the next 10 years? Bailing out the saving & loan (S&L) crisis is ok if happens once, but in the current new (raw) deal the paper printing (inflation) over the next 10 years is equivalent to bailing out 10-15 S&L crises. This is absurd and can only continue up to a breaking point - and it's not clear what is going break at the moment the snap occurs. Dividend capture is a sort of contrarian investor style, which is likely to be one of the more successful approaches over the next 10 years.

For the bad, how long can the economy take on 500-600k people losing their jobs each month? The unemployed aren't likely to be hired back next week after the stimulus kicks in, rather, it's more likely that an unobservable shock wave is going to hit the strip malls and movie theaters -- peak foreclosures on commercial real estate is projected to occur in 2011.

For the ugly, the perfect storm has already started. Looking back, after WWI the country needed an economic rebound but got the Great Depression. After Iraq and Afghanistan, the economy (a) is now on life-support, (b) has a housing sector that had no business running up, and (c) sees a forecast with 10 years of solid out of control money printing (inflation). MT (Arcelor Mittal) and X (US Steel) are going up in price right now; however, steel is projected to drop 20-40% over the next few years (so hold for dollar cost-averaging or get out). Warehouses are full with no buyers. Worse yet, there really isn't much money anywhere since it's all debt. In consideration of the above circumstances, and post-9/11-centric ideology on possibility theory instead of probability theory, what can happen will. Thus, it's possible that half of the equities you list cut their dividends. For international, you didn't list BHP or RIO, which are harvesting huge amounts of iron ore for China. You might also balance your portfolio with CHL (China Mobile), HNP (Huaneng power); and CEO (you did mention CNOOC). For power production, China is like the highly efficient French nuclear energy program on steroids and brings new nuclear plants on line quickly with good international safety standards.

You also seemed to be short on consumer goods (KO, TR) and pharmaceuticals (PG, JNJ, ABT, PFE - I would stay away from Merck since almost all of their new blockbuster drugs were not approvaed by the FDA). PM and Altria will be a good to own, and I know from my travels in Russia after the 1990 dissolution of the USSR (total devaluation of the Ruble literally overnight) that alcohol flourished in an economy whose currency went to near-zero. So DEO may be rewarding (HQ is London, so it's in non-USD currency).

I wouldn't get wrapped up in the dollar - new fiat currency of the world issue so much. Your point about exchanging dollars for another currency based on communism or the Middle East was right on the mark -- it's never going to happen. US Treasuries are being bought up by foreign central markets for one reason: there's no other country on Earth that will pay you back if it owes you money since the honor code is what keeps everything glued together. What we do have to be careful about is what Dick Smalley (Nobel Laureate) said that "money goes where the brains are" referring to the US brain drain and 90% of science and technology moving to Asia (Singapore, China) within the next 10 years. Many of the problems with the economy are due to the Fed not having e.g. a gold standard to keep everything in check. Without standards, deregulation causes governments to wage war, politicians make re-elections promises, and sectors that have no business growing (housing) grow like gangbusters. You can't tax so the only thing you can do is inflate the problem away by printing money.

The ~220 point "crash" in October 1929 was largely responsible for the Great Depression, but was only the beginning of a much worse 2-4 year correction. The current bull market may recede, with a larger and deeper correction on the horizon. Now that you're on the sidelines, the key is to slowly buy up equities that keep raising their dividend throughout the oncoming 10 year storm. By the time everything clears the compound interest from reinvested dividends will have kicked in so much that there'd be no reason to want anything else -- you'll also be invested in energy, pharmaceuticals, and consumer goods which are the 3 essential sectors proven to be worthy for lifetime wealth.