Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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