Over the long haul, two factors matter more than any
others in determining how much return you'll see from the
stocks you buy:
Unfortunately, the real economy is currently hovering
somewhere between shrinking and stagnating. As a result, many
companies' growth plans are taking a backseat to their mere
survival. While the recent market run might be an indication
that the worst of the collapse could be over, there are no
real signs of a rapid recovery.
Indeed, Nouriel Roubini, the "Doctor Doom" economist who
correctly forecast this mess in the first place, is
forecasting a sluggish recovery at best, a double-dip
recession at the worst.
You can still get returns
Although real growth may be on the sidelines for the
time being, bullet point number two can still drive your
portfolio upward.
Indeed, historically, around 44% of total investment
returns in the S&P 500 have come from dividends. Even in
more usual times, that's a huge chunk of cash. In these
times, when real growth is constrained, those payments become
even more important.
In addition to the obvious benefits of receiving the cash
in your pocket, a well-supported dividend sends an overall
message of strength. When that payment grows -- even amid an
economy called the worst since the Great Depression -- it's a
very strong signal about the company's long-term prospects.
Just take a look at how these companies have weathered this
storm:
Company
Recent Yield
Recent Dividend Growth
Payout Ratio
Net Income
(in Millions)
Cash From Operations
(in Millions)
Microsoft (Nasdaq: MSFT)
2.1%
18.2%
30.7%
$14,569
$19,037
Wal-Mart (NYSE: WMT)
2.1%
85.6%
29.8%
$13,393
$22,878
PepsiCo (NYSE: PEP)
3.2%
11.3%
52.3%
$5,090
$6,298
United Technologies (NYSE: UTX)
2.6%
15.2%
31.8%
$4,112
$5,880
3M (NYSE: MMM)
2.8% Continued... |