Last week I spent two days on the road. While driving, I like to listen to business news from CNBC and Fox Business, via SiriusXM radio. I especially like listening to the opinions, and everyone sure has one.
My takeaway from listening is that we’re entering a great period for buy and hold investors – if you know where to look, that is…
Fox Business noted that a 40-year bull market that started with a bottom in August 1982 may have ended. At that time that it began, the Dow Jones Industrial Average bottomed at 776. It now stands at 32,774.
In other words, buy and hold works if your time frame is long enough.
Growth stock investors are facing a dilemma. The growth for profitable companies is slowing. The companies may continue to grow, but at slower growth rates year over year. What does that mean for stock values and valuations? It may take a few months to a few years for the market to figure out what multiples (P/E ratios) should be put on these stocks at lower growth rates.
Non-profitable growth stocks have a problem. Investors are no longer interested in putting in more money now to maybe reap big gains years down the road.
Reddit meme stocks are back in the news, and we’re seeing big price swings with Bed, Bath and Beyond (BBBY), AMC Entertainment (AMC), and GameStop (GME). The online bulletin board crowd watches the short interest in these stocks and then piles in to squeeze the shorts when the selling gets out of hand. One would think that the short sellers would get a clue. I love to see shorts lose their shirts.
One analyst on the radio discussed 3M Company (MMM). This stock has a 4% yield and 63 years of dividend growth. The five-year dividend growth rate isn’t terrible, at 5.4% per year. This is a stock that, if you have 20 years to lock it away, could slowly make you rich.
The big picture is that no one knows when the stock market will return to significant share price appreciation. I suspect we will have several years of the major indexes going nowhere, which will come with waves of 10% uptrends and similar downdrafts.
Investing for high-yield income makes more sense than ever. My Dividend Hunter recommendations list has an average yield greater than 8%. That yield is real cash flow that can fund a retirement or be reinvested to compound and to take advantage of the expected market volatility.
Out of the second quarter earnings, I want to put my money into the good (there is plenty of bad) finance REITs. Recently I made Starwood Property Trust (STWD) the Dividend Hunter Stock of the Week—you can count on an 8%-plus yield for years to come. And to get a high-yield, low-risk Stock of the Week every week, sign up for Dividend Hunter right here.