Submitted by South of Wall Street on 12/19/2011 21:38 -0500
Apple
Google
Volatility
The front page of today's Money and Investing section of the WSJ ran an article titled: Dividend Stocks Become the Heroes.
Dividend-stock fans say the unusually strong performance is likely to last as long as volatility driven by Europe's debt crisis and the global economic fits and starts continues to grip financial markets. Stocks that pay steady dividends tend to fall less than others when times are tough.
I completely disagree with this rationale, all this dividend focused jargon is BS. First of all, the trade is over. Not to mention making INVESTMENTS on the basis of ... "hey, I won't lose a lot" is insane. This fad will pass, but it sells well right now. In fact, most of these defensive/no-growth names trade at a significant premium to the S&P. Think about that for a minute - the 'yielders' so frequently recommended on business-porn television, with their huge debt loads, unfunded pension liabilities, and engineered earnings growth, trade at a premium to businesses with real revenue, earnings, and free cash flow growth. Por exemplo.... P&G is at 16's forward earnings and Google trades at 10x's. Hmmm. Because P&G has 'yield support'?
This yield 'strategy' is an easy sell to retail investors - hence the push by managers and the Street - who create/sell products around conventional wisdom. Bottom line - its too late. The chart in the article mentioned, showing the 'Dividend Aristocrats' outperforming, reinforces my point.
The rest,,,,,,,,,,,,,,,,,,,,,,,,,
http://www.zerohedge.com/contributed/buying-dividend-yield-not-defensive-its-stupid
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
| 