Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

The Keys to Successful Investing in 2012

Stock-Markets / Investing 2012 Jan 04, 2012 - 01:47 AM GMT

By: Roger_Conrad

Stock-Markets Best Financial Markets Analysis ArticleTurmoil in Europe, uneven US economic growth and unprecedented market volatility led many investors to reject stocks this year. Bad move. Stocks outperformed other asset classes in 2011 and will continue to do so in 2012. Yields on traditional savings vehicles are virtually nonexistent.


Capturing respectable bond returns requires investors to take on high levels of credit or interest-rate risk. However, rock-bottom borrowing rates have given corporations unprecedented access to low-cost capital to strengthen balance sheets and eliminate near-term refinancing risk. Meanwhile, these companies are investing in growth and raising dividends. 

A rising dividend is the best insurance against the risk of a dividend cut. Additionally, capital gains have historically followed dividend growth. Dominion Resources (NYSE: D), for example, has boosted its dividend by 48 percent over the past decade, sending the stock price 72 percent higher, compared to an 8 percent gain by the S&P 500.

Not every dividend-paying stock performed well in 2011, and the same will be true in 2012. Despite a late-year surge, US economic growth could slow next year if the EU sovereign-debt crisis fails to reach an orderly resolution. This possibility severely reduces the margin of error for companies that stumble. This perceived risk to dividends has even sharply reduced the value of stocks that are unlikely to cut their payouts.

These risks will persist in 2012. But the principles of diversification, balance and a focus on quality will still produce solid performance.

Balance and Conquer 

Even as investors abandoned certain groups such as high-yield telecoms, they flocked to pipeline-focused master limited partnerships (MLP). US utilities were particularly strong, as you can see in “Utility Player.” Investors who loaded up on these sectors enjoyed strong gains. 

But there wasn’t much evidence in early 2011 that safety-focused sectors would lead the way. In fact, before the Japanese earthquake in March and the Arab Spring, the global economy seemed to be on the mend, and investors were snatching up the highest-yielding stocks.

Opportunistic sector selection is a proven strategy for growth-oriented investors. But income investors must buy and hold to collect dividends and interest and avoid punitive taxation. 

Today’s leading sector is often tomorrow’s laggard. That’s why investors employing a buy-and-hold strategy must own stocks from a wide range of sectors.



“Paying Dividends,” which highlights the yields and five-year total returns for several sectors that I track, demonstrates this point. That MLPs, represented by Alerian MLP Index, have performed well shouldn’t surprise investors. But Canadian income trusts outperformed MLPs, a surprising outcome for investors who shunned the group after the “Halloween Massacre” of 2006, when Finance Minister Jim Flaherty announced a new tax on the sector beginning in 2011. 

Most Canadian income trusts have since converted to taxpaying corporations, and roughly half of these companies cut their dividends after the transition. The TSX S&P Trust Index, however, beat the S&P 500 by nearly 100 percentage points, while paying a dividend that was three times as high.

At this point, the prognosis looks superb for MLPs and utilities. Canadian companies, Australian firms such as APA Group (ASX: APA, OTC: APAJF) and “super oils” also look set to prosper in 2012.

Given recent market history, some reversal of fortune is likely. That’s why I maintain positions in sectors that have underperformed during the past five years, including real estate investment trusts, financials and high-yield telecoms. 

Roger Conrad is the preeminent financial advisor on utility stocks and income investing. He is the editor of Big Yield Hunting, Australian Edge, and Canadian Edge, as well as Utility Forecaster, the nation's leading advisory on electric, natural gas, telecommunications, water and foreign utility stocks, bonds and preferred stocks.

Mr. Conrad has a track record spanning three decades, delivering subscribers steady double-digit gains of 13.3% annually since 1990. And he’s done it all with a focus on capital preservation and risk minimization by investing in big dividend stocks including Canadian Income Trusts, high-yield REITs, MLP investments, among many others.

Mr. Conrad has a Bachelor of Arts degree from Emory University, a Master's of International Management degree from the American Graduate School of International Management (Thunderbird), and is the author of numerous books on the subject of investing in essential services, including Power Hungry: Strategic Investing in Telecommunications, Utilities and Other Essential Services

© 2011 Copyright Roger Conrad - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules