Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
THE GLOBAL WARMING CLIMATE CHANGE MEGA-TREND IS THE INFLATION MEGA-TREND! - 3rd May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

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.


© 2005-2022 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