{"id":28644,"date":"2012-03-28T12:30:28","date_gmt":"2012-03-28T16:30:28","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/28\/beat-any-bear-market-with-dividend-stocks\/"},"modified":"2012-03-28T12:30:28","modified_gmt":"2012-03-28T16:30:28","slug":"beat-any-bear-market-with-dividend-stocks","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/28\/beat-any-bear-market-with-dividend-stocks\/","title":{"rendered":"Beat Any Bear Market with Dividend Stocks"},"content":{"rendered":"<div align=\"left\"><script type=\"text\/javascript\">\ntweetmeme_style = 'compact';\n<\/script><br \/>\n<script type=\"text\/javascript\" src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\"><\/script>\n<\/div>\n<div><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-28578 \" title=\"Beat Any Bear Market with Dividend Stocks\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/03\/bear-market-dividend-stocks.jpg\" alt=\"Beat Any Bear Market with Dividend Stocks\" width=\"220\" height=\"220\" \/><\/p>\n<p>Trying to time the market is a fool\u2019s game. Instead, here is a time tested (yet underappreciated) method for riding out volatile markets.<\/p>\n<\/div>\n<p>On Sunday, I was on a plane traveling across the country. With lots of time on my hands, I did something I haven\u2019t done for years. I read every section of the Sunday New York Times. It was a great way to spend the day as the hours on the plane just flew by.<\/p>\n<p>One article, in particular grabbed me. Paul Lim discussed whether or not we were in an old bull market or a new bull market.<\/p>\n<p>To sum up the arguments, they went like this:<\/p>\n<p><strong>Old bull<\/strong> \u2013 In order for a bull to become a bear, the market has to drop 20% on a closing basis. The largest decline (on a closing basis) since the bull started in March 2009 was 19.4%. Therefore, the bull is still in effect.<\/p>\n<p><strong>New bull<\/strong> \u2013 On October 3, the market was down 20% from the highs on an intraday basis (though it didn\u2019t close that low). Additionally, over the past six months, small cap stocks have outperformed large caps. That is typical behavior of new bull markets.<\/p>\n<p>I say it\u2019s all bull.<\/p>\n<p>Not that I don\u2019t believe we\u2019re in a bull market. I do&#8230;<\/p>\n<p>It\u2019s just that I don\u2019t really care whether we\u2019re in a new or old <a title=\"Here\u2019s Why the Bull Market is NOT Over\u2026\" href=\"http:\/\/www.investmentu.com\/2012\/March\/bull-market-2012.html\" target=\"_blank\">bull market<\/a>. It\u2019s not going to impact my investing decisions or recommendations.<\/p>\n<p>In my active trading services, I\u2019m going to react to the market that\u2019s right in front of me. I\u2019m not going to try to figure out if we have a few months or a few years of the bull ahead.<\/p>\n<p>In the <em>Ultimate Income Letter\u2019s<\/em> Perpetual Income Portfolio, which is designed to generate a high level of income both now and over the long term, I don\u2019t worry about bulls or bears \u2013 just great stocks with a track record of raising their dividend payments year after year, providing members with more income than they received the year before.<\/p>\n<p>Investors in <em>The Oxford Club\u2019s<\/em> Gone Fishin\u2019 Portfolio also don\u2019t concern themselves with whether the market is in a bull or bear phase. The positions in that portfolio have consistently beaten the market for years, during all kinds of cycles and environments.<\/p>\n<p>It is incredibly difficult to time the stock market. Even those \u201cexperts\u201d who made great calls right before the markets tanked haven\u2019t been able to duplicate their previous success. When was the last time you heard from any of the prophets who correctly called the \u201987 crash?<\/p>\n<p>Trying to time the market, particularly with your long-term portfolio is a fool\u2019s game. Instead, here is a time tested (yet underappreciated) method for riding out volatile markets.<\/p>\n<h2><strong>Perpetual Dividend Raisers<\/strong><\/h2>\n<p>Look for stocks that are what I call \u201cPerpetual Dividend Raisers\u201d. These are stocks that have a track record of raising the dividend every year. For most stocks, that will keep <a title=\"Beat Inflation and a Down Market With Dividends\" href=\"http:\/\/www.investmentu.com\/2011\/September\/dividend-stocks-beat-inflation.html\" target=\"_blank\">ahead of inflation<\/a> and the high yield will provide a buffer in a market downturn.<\/p>\n<p>For example, let\u2019s say you\u2019re invested in <strong>Darden<\/strong> (NYSE: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=DRI\" target=\"_blank\">DRI<\/a>), the operator of Olive Garden, Red Lobster and LongHorn Steakhouse restaurants. It currently pays a 3.4% dividend yield. Darden has raised the dividend every year for seven years. Over the past five years the average raise was 28% per year.<\/p>\n<p>If the company\u2019s dividend growth rate slows down to 14% per year, the yield would still climb to 5.6% in five years and swell to 10.7% in ten years.<\/p>\n<p>And if you don\u2019t need the income today and can <a title=\"Dividend Aristocrats: The Most Profitable Force in the Universe\" href=\"http:\/\/www.investmentu.com\/2012\/March\/dividend-aristocrats.html\" target=\"_blank\">reinvest those dividends<\/a>, the numbers get even more impressive. Assuming the stock performs according to the historical average of the stock market, your yield would grow to 6.5% in year five and 15.9% after a decade. Even more impressive is that your compounded annual growth rate would be 11.5% after five years and 12.2% after ten.<\/p>\n<p>But what if one of these market prophets calls for the end of the bull market and is right? What happens to your Darden shares then?<\/p>\n<p>As long as the company continues to raise the dividend, the yield numbers mentioned above will stay the same. And there\u2019s no reason to think they can\u2019t do it. Darden even raised the dividend significantly during the Great Recession of 2008 \u2013 2009.<\/p>\n<p>If the stock market experiences a protracted bear market, you can still make a lot of money on your Darden stock by reinvesting the dividends.<\/p>\n<p>As the market falls, reinvested dividends buy more stock. So if the market fell 5% per year every year and you had invested $10,000 in Darden, you\u2019d be down about $100 after five years (not bad considering the overall market would be down by 25%. However, after ten years, you\u2019d be <em>up<\/em> over $4,000 because of the power of <a title=\"A Three-Step Plan to Surviving Market Paranoia\" href=\"http:\/\/www.investmentu.com\/2011\/November\/3-steps-to-survive-market-paranoia.html\" target=\"_blank\">compounding dividends<\/a>, particularly when shares are cheap.<\/p>\n<p>So for an investor who is reinvesting dividends, as long as they don\u2019t need to sell anytime soon, a bear market is actually their best friend.<\/p>\n<p>Owning Perpetual Dividend Raisers and especially reinvesting those dividends allows you to ignore all of the chatter about bulls and bears as your portfolio will grow no matter which creature is in control of the market.<\/p>\n<p>Good Investing,<\/p>\n<p>Marc Lichtenfeld<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=WMB-68jxdE4:zHVkFn2Lc-8:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=WMB-68jxdE4:zHVkFn2Lc-8:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=WMB-68jxdE4:zHVkFn2Lc-8:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=WMB-68jxdE4:zHVkFn2Lc-8:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=WMB-68jxdE4:zHVkFn2Lc-8:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=WMB-68jxdE4:zHVkFn2Lc-8:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=WMB-68jxdE4:zHVkFn2Lc-8:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=WMB-68jxdE4:zHVkFn2Lc-8:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/WMB-68jxdE4\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Trying to time the market is a fool\u2019s game. Instead, here is a time tested (yet underappreciated) method for riding out volatile markets. On Sunday, I was on a plane traveling across the country. With lots of time on my hands, I did something I haven\u2019t done for years. I read every section of the &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2012\/03\/28\/beat-any-bear-market-with-dividend-stocks\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Beat Any Bear Market with Dividend Stocks&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28644","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28644","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28644"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28644\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28644"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28644"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28644"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}