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Get Paid to Wait
October 29, 2011
All said, it looks like October will go down as having been a fairly good month for the stock market. In fact, the year hasn't done so poorly either. Last Wednesday the Dow finally inched past the 12,000 mark for the first time in at least two years. Will it keep going higher to year's end? Who knows? There's still unrest and uncertainty in the overall world market, and there's no question that this past weeks gains were mostly as a result of actions taken in Europe to quell some of their own economic woes. One thing I am wholly convinced of, however, is that the markets will go up eventually.
For that reason the concept of getting paid to wait just makes sense. Besides, no matter how you slice up where the U.S. economy stands right now, and how many people are still unemployed, one thing is certain. Companies, despite it all, are doing well. The fundamentals are strong. Businesses are sitting on mountains of cash. It's not like there isn't money to go places when things start heading toward better days.
Getting paid to wait is something Jim Cramer, host of Mad Money on CNBC has been talking about for some time, and I think he's right on the money with this idea. We really do have to see the forest for the trees when it comes to making sound investment choices. You look for the tried and trues, those companies that are out there that have products people need no matter what the state of the economy is. You look for those companies who have paid consistent dividends over time, and especially you look for those companies who have consistently paid, and increased their dividends since the start of the Great Recession.
Some stocks that I like a lot happen to be from companies like McDonald's (MCD), and International Paper (IP). Stocks like Proctor & Gamble (PG), and General Mills (GIS). Most of these stocks pay dividends in excess of 3%. That's far better than even a higher yield certificate of deposit is going to get you right now. Other stocks pay considerably higher dividends like Phillip Morris (PM) at around 4%, and Duke Energy at almost 5%.
One stock worth taking a close look at currently is also Ford, though Ford does not currently pay a dividend. But they are looking into it, which I think bodes very well for this stock. Will they pay the former dividend of 40 cents per share before they suspended it? I don't know. But I do know that Ford stock will pay off two-fold. For one thing, I think Ford stock is considerably undervalued so it has quite a bit of upside on its own. The dividend, should it be reinstated by the company's board would simply make this stock even more attractive. Buying shares now I think would be a very smart move, and if a dividend does get reinstated, I think this company's stock will go higher simply on such news. Ford is still the only U.S. automaker to come out ahead of the pack since the proverbial you-know-what hit the fan, and Ford paying a dividend will only serve to solidify Ford's standing as a solid company with great products Americans want, with a fantastic business model to boot.
I scoff at CEO pay quite often, but I'll tell you that as far as I'm concerned, Mulally has earned every penny he gets, and even maybe deserves more.
The thing is that unless you believe that the entire world economy is forever doomed, buying stocks right now, and especially buying strong stocks right now that pay hefty dividends is going to make you a ton of money in the coming years. Granted, it's going to require patience. It's going to require a little of intestinal fortitude. It's going to require having a pretty strong stomach. But it will all be worth it in the end.
When I used to help my mother with her budget I would always tell her when she got frustrated with the trials of the here and now, "The rewards are many, though not today." Today is the building process. Today is the hard part. Today is the work that gets you to the payoff. Work is never easy. But it does have its rewards if you do it right. The rewards are coming if you want them. The markets will rise. And while you wait, you can collect a paycheck in the form of dividends.