Tags: dividend | stocks | income | investors

Seeking Alpha: 3 Ways to Use Dividend Stocks to Profit Despite Volatility

Seeking Alpha: 3 Ways to Use Dividend Stocks to Profit Despite Volatility
(Dollar Photo Club)

By    |   Friday, 27 May 2016 07:17 AM


This year’s volatile stock-market swings might have the average investor pulling their money and stuffing it under their mattress until serenity and calm returns.

With uncertainty about the global economy and U.S. presidential as a gloomy backdrop, the savvy investor will realize there is no perfect shelter. And Columbia Threadneedle Investments explained to Seeking Alpha that there is a strategy to remain in the market and make some cash in such turbulent circumstances.

“In today's slow-growth economy, investors view even minor market events as warning signs, triggering the emotional reactions that contribute to market volatility. During those ups and downs, you need a strategy that helps maintain a focus on income goals,”
Columbia Threadneedle Investments’ Melda Mergen said.

“Quality dividend stocks can help ease that tension by limiting the risk of short-term price declines, while providing a long-term answer for investors who need income now - and assets that can grow in the future.”

Three tips for to help income-oriented investors:
 

1. Pick stocks for their high-quality income for greater protection during market turbulence.

Look for:

  •     Strong balance sheets with limited debt and ample free cash flow.
  •     Reliable business models.
  •     A track record of spending their money in shareholder-friendly ways.
  •     They likely have the will and capacity to prudently increase dividend payouts over time.

2. Diversify across sectors. “Equity income strategies are not limited to the few sectors once associated with yield, such as utilities, telecom and energy. Opportunities have improved in sectors such as information technology, consumer staples, materials and industrials,” Mergen said.


3. Don't limit yourself to yield-chasing stocks. “Stocks with solid, higher dividends and others offering lower yields but great potential for future income growth both have a place in portfolios. The act of merely chasing yield in any kind of market can work against the long-term goals of a quality equity income portfolio,” Mergen said.

There has been a steady drumbeat of praise for dividend stocks.

Stock-market guru and economist Jeremy Siegel predicts a sea-change in investing in which investors will once again embrace dividend-paying stocks. "I think we're in the first inning of shifting to dividend-paying stocks," the finance professor at the University of Pennsylvania's Wharton School told CNBC.

"Investors are becoming convinced they're not going to be able to rely on CDs, their bank accounts, or even bonds as a source of income," and may finally include that "maybe they'd better turn to stocks," he said.

"Equities are the major income-producing asset of the future," he said.

"Maybe we'll go back to the period of the '50s and early '60s, when people really did buy stocks for their income-earning aspects, and that was a source of very good demand and very good stock returns," he said.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
This year's volatile stock-market swings might have the average investor pulling their money and stuffing it under their mattress until serenity and calm returns.
dividend, stocks, income, investors
452
2016-17-27
Friday, 27 May 2016 07:17 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved