Tags: dividend | dips | stocks | market

Invest in Dividends and Dips During a Flat Market

By    |   Friday, 24 April 2015 08:56 AM

The market so far this year has been frustrating, like a long journey that ends exactly where you started.

As of this writing, the S&P 500 has just surpassed its all-time high. As a result, the index is up about 3 percent for the year. However, the market has made several all-time highs earlier in the year only to fall back again. In January and February, the fluctuations were larger. But lately the market has been less volatile. The index is still going nowhere but more peacefully.

It's a matter of offsetting forces. The bad news and the good news are of roughly equal force right now. On the downside, the economy and earnings have slowed. It was a bad first quarter because of cold weather, the strong dollar and the energy sector issues. The market is fairly highly valued at about 20 times earnings. Strong earnings will be needed to drive prices higher, but first-quarter earnings were lousy.

The good news is that the first quarter is behind us. Oil prices and the dollar seem to have stabilized. And the benefits of a strong dollar and cheaper oil, such as much lower input costs, have yet to seep into earnings and the economy. The rest of the year should prove much stronger. At the same time, don't forget, money still has no place else to earn a decent return besides stocks.

Stock performance for the rest of the year will be heavily reliant on earnings and the state of the economy. But strong economic performance in the back end of the year is still no guarantee. As well, the global economy could tip the balance. But the jury is still out on whether economic growth will strengthen during the rest of the year. There are risks as well, such as a possible Greek exit or an escalation of violence in the Middle East.

So far, neither good news nor bad news has been able to get the upper hand in the battle of 2015. One side gains a little bit only to be overtaken by the other side. It reminds me of World War I. Ultimately, I believe the market will continue to have an upward bias and deliver positive returns for the year. But results are unlikely to be close to what we've seen in the past few years.

Getting strong returns will require a more strategic approach than just buying at any ole time. Specifically, I believe investors have a great chance of enhancing returns by buying on dips and buying dividend stocks.

Dividends are key to returns in any market but especially flat markets. As well, with low yields on bonds, dividend stocks are practically the only game in town for investors to generate much needed income. Simple demand should help buoy these stocks.

Then there's buying on market dips. The battle of good news and bad news should continue throughout the year and there will be periods when bad news wins out. But they should be temporary and offer an opportunity to invest when the market goes down.

The market indexes may not post exciting results for the year. But with dividends and dips you should do just fine.

About the Author: Tom Hutchinson
Tom Hutchinson is a member of the Newsmax Financial Brain Trust. Click Here to read more of his articles. He is also the editor of The High Income Factor. Discover more by Clicking Here Now.

© 2021 Newsmax Finance. All rights reserved.

1Like our page
The market so far this year has been frustrating, like a long journey that ends exactly where you started.
dividend, dips, stocks, market
Friday, 24 April 2015 08:56 AM
Newsmax Media, Inc.
Newsmax TV Live

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 Media, Inc.
All Rights Reserved