What a difference a year makes. Last year at this time the stock market was on a tear, it just came off it all time high of 14,136 and looked like it was taking a healthy pull back, waiting to go up again. Then all of a sudden all the walls started to fall from the house of cards that had been built over the last few years. Signs of trouble from the sub-prime mortgage were starting to show.
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Fast-forward back to November 2008. The stock markets have lost nearly 50% from where they were last year and everyone is running for some sort of safe place to hide their money until the storm has passed. Jim Cramer from TheStreet.com
has been suggesting hiding out in strong companies that have some great dividends.
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What are dividends? Dividends are what some companies give to their shareholders. Basically dividends are cash that the company distributes from their cash reserves because they don’t have anything else to do with the profits that they make every year.
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Dividend payouts are figured on a percentage basis of what the share is worth at the time. When stocks drop in value, the yield on those dividends rises. Let’s say that a company’s stock is valued at $100 and they give a $5 dividend payout for the year (typically broken up in four payments), the yield of those dividends are 5%. Now if the company is now trading at $40 per share, the yield would be calculated at 12.5%. That would be some great returns on your investment. You can’t get that in any other type of investments.
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The problem comes in where the yield is too high for the company to keep paying out that dividend. So the company will cut the dividend to help the company keep some cash flow. So what is considered the “sweet-spot” yield for dividends? It’s hard to really pinpoint it. Typically look for those strong companies that give any where in the 3%-7% yield, but anything that is over 10% is considered too high to really expect it to stay there.
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Don’t get me wrong there are some that continue to give double digit yields, but they’re few and far between. The only one that I can say that kept their dividend payout the same this past month was Atlas Pipeline Partners (NYSE:APL). The stock was trading at $18 per share and their quarterly payout was $0.96 per share. That was a 5% yield just for the quarter, if you calculate it for the year it comes out to a 20% yield. I don’t expect it to be the same when they pay out their next dividend in February 2009. The company is in trouble now that oil has come down so much, so my advice is to stay away from Atlas.
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photo by Hagerman
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No matter what good news may be out there to trade on, someone else will sell on that same message. The Markets again for the second day trades lower. The Dow closes down almost 6% with most of that lose happening in the morning hours, but at one point it was down nearly 700 points.
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In after market trading Amazon fails to beat the street with their
earnings report, while Amgen beats what was expected from them today. Amgen has actually raised guidance for next year. What are you to do with this news? Nothing. For one by the time you’re able to get into Amgen the news will be priced into the stock. As of right now in after market trading Amgen is up $3 per share and the news just came out Secondly in this volatile market that we’ve been seeing, in the next couple off days we could see another major down day and see the stock drop below it $49.73 close price of today.
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Freeport McMoran Inc (NYSE:FCX) Has taken a beating in the last few weeks or so that has the price down to a new five year low. If you have five years to wait before you need you money, this might be the stock for you. In regards to the basic material sector, these stocks have been dealt a blow that will take some time before they really come back to the level that they were at this time last year. If you’re a veteran
trader I’m sure that the UltraShort Basic Materials ProShares (AMEX:SMN) is something that you’ve been following if not trading . The stock was at $66 just two days ago and hit an intra-day high of $92.97 in the last 20 minutes of open trading today.
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If you’re going to trade in this volatile market, you need to know how to play both sides of the trading floor. You need to diversify your portfolio and understand what shorting can do for you. It something that I recommend for average traders to do until you fully look into how it’s done.
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In the last two days the Dow has lost nearly 700 point (almost 8%), but because of how I trade and hedge myself, I’ve increased my portfolio over 15% during the same period. Do your homework, double check your research and follow through with your
due diligence.
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What a day in the stock market. the day started with the big three markets in the green and continued that way throughout the entire trading period. I did expect the day to go quite different on the fact that Ben Bernanke and Hank Paulson were due to speak during the trading day. When that usually happens lately, the markets don’t react in a positive way. It was mentioned over the weekend that there will be continued international support for the financial system, with focus being on the effort to loosen the credit lending.
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The basic material sector had a great day today. It assumed that the sector was oversold over the past week and took back some of those loses. The entire sector started in positive territory and continued to tick upward.
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Oil also had a good day by moving up just over $4 during the day. It’s being said that the bottom is starting to show with this commodity. OPEC is expected to cut production after their meeting in a couple of days. As a matter of fact the latest news is now that they might not cut production since they need make up for the revenue from the drop in prices.National Oilwell Vargo Inc. Had a great day with a 24% gain. A stock that was beaten up for last few months after hitting a high of $92.70 back in July of this year and now after today’s gain is at $31.80 in after market trading.
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Early in the day Ben Bernanke spoke with Congress today on the condition of the economy. He did say that he sees the economy to be weak during the next couple of quarters. He also took the time to inform Congress that a second stimulus check is something that should be considered to help the economy. I do have to say that when Bernanke speaks (in english) I still need a translator to figure what he’s really saying to us average Joes.
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The markets looked quite strong today and continues to look that way through after market trading, but be aware that we are not out of the woods yet. Take you time and do your due diligence with any company that you want to jump into.
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