Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


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 - 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