Here we go again: another major sell-off on Wall Street.
On Thursday, the
Dow Jones Industrial Average fell nearly 1,000 points before "recovering" and winding up with a loss of 348 points. The Dow plunged on worries about the
debt crisis in Greece spreading throughout Europe and perhaps hurting an already beleaguered American economy.
It's days like these that make investors want to pull out their hair. But before you let the Dow's tumble take you down, it pays to remember a few financial truisms when it comes to investing in volatile times.
Truism #1: He Who Panics Usually Loses
While it's natural to fret over the prospect of losing your retirement money -- and watching your 401(k) act more like a 201(k) -- it's also important to know that bailing out of the market when it's in a downward spiral is almost always a bad move. When you sell into a market downturn, you simply lock in your losses.
It's a hard bit of advice to follow, but often when stock markets swoon, the best approach is to simply do nothing. For those who are close to retirement, this is a tougher thing to do, which is why the following truism should guide your decision making.
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10 Stocks That Will Keep Paying Dividends
A large number of investors purchase stocks for their yields. People on fixed incomes often use dividend payments to cover basic living expenses. Other investors look at companies paying dividends as "safe havens". Their share prices may go down, but at least holders get a quarterly check. It is a good system until the firms with impressive yields become concerned that they are running low on cash.
24/7 Wall St. found a small number of large companies which are likely to keep their dividends at current levels even through a deep recession. These companies have tremendous amounts of cash on their balance sheets, little or no debt, and are in businesses which are almost certain to have strong margins even in tough economic periods.
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10 Stocks That Will Keep Paying Dividends
A large number of investors purchase stocks for their yields. People on fixed incomes often use dividend payments to cover basic living expenses. Other investors look at companies paying dividends as "safe havens". Their share prices may go down, but at least holders get a quarterly check. It is a good system until the firms with impressive yields become concerned that they are running low on cash.
24/7 Wall St. found a small number of large companies which are likely to keep their dividends at current levels even through a deep recession. These companies have tremendous amounts of cash on their balance sheets, little or no debt, and are in businesses which are almost certain to have strong margins even in tough economic periods.
(To page through gallery, mouse over the top-right portion of the image at left and click on right arrow.)
10 Stocks That Will Keep Paying Dividends
AT&T
AT&T (T) sells phones and telecom services. This is a sector that will always be with us. AT&T is now into the business of delivering video to people's homes and data to their cellphones. Both are likely to grow for years. In the final quarter of 2008, AT&T had net income of $2.4 billion on revenue of $31.1 billion. The company has free cash flow of $5.4 billion for the quarter and $13.3 billion for the year. For 2008, dividends paid totaled $9.5 billion, shares repurchased totaled 164.2 million for $6.1 billion. Put another way, AT&T is rolling in money. Investors can take the $1.64 dividend and 6.4% yield to the bank.
10 Stocks That Will Keep Paying Dividends
Halliburton
Halliburton (HAL) supplies services to the oil industry. That would seem, at first, to be a bad business to be in as crude prices fall. Fortunately for the company, while oil exploration has dropped quite a bit in North America, it is still a healthy business in part of the Middle East, South America, and a number of areas offshore where fields used to be too deep to reach. In the fourth quarter, HAL had operating income of $776 million on revenue of $4.9 billion. Management has said the 2009 sales will be a little soft, but not catastrophic. Halliburton has cash and receivables of almost $5 billion and payables and debt of $3.4 billion. The firm's dividend is $.36 a quarter which is a yield of 2%. Not a big return, but completely safe.
10 Stocks That Will Keep Paying Dividends
Johnson & Johnson
Johnson & Johnson (JNJ) had revenue of $63.7 billion last year. It made a net profit of $13 billion which was up 22% from 2007.Very few large operations have that level of net margin. The company has three main businesses: consumer, which sells soaps and toiletries, pharmaceuticals, and medical devices. While drug sales were off a bit last year, the other two lines of business improved. JNJ expects EPS this year to be about the same as last. The most recent balance sheet filed with the SEC shows JNJ with long-term debt of under $8.4 billion and cash and marketable securities of almost $15 billion. The company has a $1.80 dividend and 3.2% yield. Its payout is safe.
10 Stocks That Will Keep Paying Dividends
PepsiCo
PepsiCo (PEP) pays out $1.70 which is a yield of 3.3%. There are a number of reasons that the dividend is safe. The most important may be that people will buy cheap soft drinks in almost any economy, whether it is good for their health or not. In its last reported quarter, Pepsi made $1.5 billion on sales of $11.2 billion. The firm's annual operating income of about $6 billion is almost equal to its long-term debt of $6.5 billion.
10 Stocks That Will Keep Paying Dividends
Microsoft
Microsoft (MSFT) may not be the fast-growing company it was a decade ago, but its core software operations still have margins of over 70%. In the last quarter, Microsoft had operating income of almost $6 billion on revenue of $16.6 billion. The firm has almost $21 billion in cash and investments. It has no debt. Microsoft's dividend is $.52 and its yield is 3%.
10 Stocks That Will Keep Paying Dividends
McDonald's
McDonald's (MCD) has a business which is often described as recession-proof. Its dividend is as well. Last year, McDonald's comparable store sales rose almost 7%. When it reported its annual earnings it said it had returned "$5.8 billion to shareholders through shares repurchased and dividends paid, including a 33% increase in the quarterly cash dividend to $0.50 per share for the fourth quarter – bringing our current annual dividend rate to $2.00 per share." The company had revenue of $23.5 billion and net income of $4.3 billion. If anything, the shareholder return from MCD could go up this year.
10 Stocks That Will Keep Paying Dividends
Costco
Costco (COST) is in the top tier of an awful industry. Retailing is falling apart, but a few firms like Wal-Mart are doing fairly well. Costco has a $.64 dividend and $1.4% yield. In the company's last reported quarter, which ended on November 23, Costco's sales were $16 billion, up 4% compared to the same quarter a year ago. Net income was $263 million. Even though very few consumers are shopping, in December the company produced sales of $7.4 billion down only 2% from the same period a year ago. Last week, Costco announced its quarterly dividend of $.16. The company has long-term debt of $2.2 billion and cash of $2.2 billion.
10 Stocks That Will Keep Paying Dividends
Disney
Disney (DIS) has a $.35 dividend and modest 1.6% yield. Some of the company's units may suffer during the downturn. Traffic to its theme parks will almost certainly drop. Advertising on the ABC network is likely to drop. For Disney's fiscal year, which ended on September 27, the company's revenue rose 7% to $37.8 billion. Income from continuing operations dropped 5% to $.4.4 billion and free cash flow was almost $3.9 billion. Disney has over $11 billion in long-term debt and $3 billion in cash. That ratio is not as favorable as for some other companies on the list, but its free cash flow gives Disney a large buffer.
10 Stocks That Will Keep Paying Dividends
Comcast
Comcast (CMCSA) has a good reason keep paying its dividend. Its founding family runs the company and still owns a large piece of the firm. Comcast pays a $.25 dividend for a 1.6% yield. The fortunes of the cable firm may be helped by the government's new stimulus package. Part of the current plan to improve broadband infrastructure is to give tax incentives to the companies that build out the new systems. According to BusinessWeek, "those most likely to benefit would be existing broadband providers such as AT&T (T), Verizon Communications (VZ), and Comcast (CMCSA), because they have the capital to make investments, and it costs less to extend their networks than it does to build new ones." Comcast hardly needs the help.
10 Stocks That Will Keep Paying Dividends
Truism #2: Your Asset Allocation Mix is Most Important
Most people really shouldn't worry about the performance of individual stocks or bonds, or the general performance of the stock market. Instead, they should be focused on their own unique asset allocation, or the mix of stocks, bonds, cash and other investments that make up their portfolio.
After all, it's your
asset allocation that determines more than 90 percent of your investment performance.
For this reason, the younger you are, the more money you should generally have invested in stocks. If you've got 20 or 30 years until retirement, you can afford to ride out wild stock market swings. But if you're a decade or less away from retirement, and if you want to sleep well at night, you clearly need to be more conservative and safeguard your money by having less exposure to stocks and more capital invested in bonds, cash or money-market instruments. Still, even pre-retirees and those already in retirement need some stocks for growth potential and to ensure the inflation does not erode the value of their dollars.
Truism #3: It's Not the End of the World
At every major downturn -- whether it's because of a recession, political strife, or some other cause -- people always suggest that the sky is falling and that "this is the worst" it's ever been. Well, try telling that to folks who lived through the Great Depression and saw their entire fortunes wiped out and witnessed unemployment fall to 25 percent.
This is not the worst financial dilemma ever known to man -- although I concede that this recession is the worst economic pain that most of us have felt in our life times. From an investment standpoint, however, stocks have been remarkably resilient even amid recessions, including this one. For every 10-year period since the 1920s, the stock market has posted an average annual return of 10 percent.
Those gains, however, were only reaped by those with the fortitude and courage to invest, even when it got uncomfortable, and even when their fears were telling them to cut bait and run.
Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has also been featured in top newspapers including the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times best seller
'Zero Debt: The Ultimate Guide to Financial Freedom.'
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Comments: (5)
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By: wayne on 5/06/2010 8:56PM
THIS IS THE TIME TO BUY
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By: Keith @ LifeTuner on 5/06/2010 10:57PM
It's a little sad that it's the unhealthy food like McDonald's that is considered recession-proof.
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By: tom on 5/07/2010 8:48AM
BUSH DID IT
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By: ooozzzzz on 5/07/2010 8:56AM
According to the financial media news, it was a "technical glitch" and Wall Street computers are being blamed for the massive decline along with the financial crisis in Greece but I'm not buying it.
I call it “Someone On Wall Street Screwed Up”, a "human error" manual typo entry that no one in the news wants to man up and admit to since that requires further & deeper investigation, assigning blame on someone, having the embrassased Wall Street CEO face the music before the US Congress once again or the possibility of firing somebody and no one on Wall Street wants that controversy hanging over their heads especially since the majority of Americans don't trust Wall Street anyway.
Acccording to the news, that "technical glitch" occurred when a Citigroup trader accidentally hit ‘b’ for billion instead of ‘m’ for million in a trade that sent U.S. stocks to fall literally in the bottom which resulted in investor panic selling that caused some stocks, including Dow component Procter & Gamble (PG, Fortune 500), to plunge 37% to $39.37 per share from the close of $62.12 Wednesday. Proctor & Gamble recovered most of that loss by the close (buyers started buying again), ending just 2% lower.
For the Dow, it was down from 400 to 800 points in just five minutes (around 2:00) and then fell to 998.5 points, the lowest for the day before recovering and ending the trading day (4:00) at 347.80 points.
All this free fall happened in just five minutes and you are trying convincing me and evading the fact that it wasn’t human error (someone typed in the wrong letter on a keyboard) and blaming it all on a computer malfunction and Greece? Because if it was not human error and someone didn't screwed up, why did the Dow jump back and recovered from a low of 998.5 points back to 347.80 and it all happened before the market close yesterday?
If Greece had totally hit rock bottom and went belly up, then yesterday’s Dow close would have been closer to an 800+ or 900+ loss and today would Dow market be talked about today as an ass tightening experience, expecting the Dow to fall even further that it did yesterday but no one has even mentioned that this morning (everything seems normal) but we will see once the markets opens at 9:30 am.
And yes, fears about the Greek financial crisis has been going on for months and now the citizen protests are heating up all over the streets of Greece but the European leaders have pledged before yesterday to provide Greece with $146 billion in stimulus loans over the next three years, attempts by the nation to institute certain "austerity" or correction measures to bring down the deficit which have sparked riots and other violent outbursts. But this civil unrest has been going on for several weeks and the US stock market has been negatively affected in a steadily decline daily but Greece’s problems causing a massive, one day 900+ point drop when European nations are trying to bail them out?
Somebody on Wall Street, along with all these Wall Street financial media experts have decided to push this "technical glitch" lie big time and playing on people’s ignorance.
And after today, if the Dow loses a little or gains anything, then it all goes away, it was a "blip on the screen" and back to business as normal.
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By: Parag on 1/27/2011 4:15AM
A lot of people neglect to use their own experience when thinking about Investing in stock market. If you have worked for 20 years in a certain industry then you have a store of information which you can use.
http://www.prime-targeting.com/investing-in-stock-market/
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