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Investing in Dividend Paying Stocks
Written by: Charles O'Melia
I was recently interviewed for a press release through a financial
question and answer format. One of the questions asked of me in the
interview was: Where do you think the stock market is headed
over the next five years?
My Answer!
Charles M. O’Melia: No one knows! There is an old Chinese proverb
that goes something like this: “He, who could foresee events 3 days
in advance, would be rich for thousands of years.” On a long-term
basis I have only witnessed expansion and progress. I believe that
to be the nature of our American economy and our American way of
life. And as our economy goes, so goes the stock market and I see no
reason to change that belief.
Who would have thought the expansion in China would generate 5
billion dollars of business for GE? The US companies listed on the
New York stock exchange have the ability to profit throughout the
global expansion of business around the world. And, an investor can
profit without the necessity of having to own an overseas fund or
companies to profit. Up until that question, the thought of
what the market was going to do tomorrow (or for that matter, 5
years from now) have never concerned me. I never gave it a thought
(Well, maybe a little!). There just isn’t enough concern on my part
whether we are heading for a bear market or a bull market, or if the
markets are heading sideways.
When you own a portfolio filled with companies that have a history
of raising their dividend every year, and a systematic approach of
adding more shares to the portfolio through the dividend
reinvestments every quarter, plus having a simple savings plan with
an opportunistic buying approach of adding even more shares to the
portfolio every quarter, it really doesn’t matter. I am always
buying more shares. Sometimes I pay too much for one of my
companies; sometimes I receive a great bargain. But no matter which,
bargain or expensive, my income from those companies always
continues to grow and grow and grow and grow and grow.
Sometimes, the dividend yield of one stock may be 5.15%, and the
following year or two (even with two dividend increases during those
two years) the dividend yield would drop to less than 3%. This, for
example, may mean the stock price would have risen from the 30
dollar range to the 60 dollar range. I have found that when that
5.15% dividend yield drops to around 1%, the company’s stock in
question becomes so high that the company usually has a stock split,
as well as a dividend increase.
Right now, the DOW seems to be having trouble breaking that 11,000
barrier. And, right now, I can’t help thinking back, way, way, back.
For those of you who don’t remember the late 1960’s, early 70’s, the
DOW barrier was 1,000.
Oh, what a tough time that DOW 1,000 barrier was! I remember
thinking – it’s going to break it this time. Back in 1966 was the
first attempt (rose to 985) and it kept on trying to break the 1,000
barrier for the next 6 years. When it finally broke 1,000 (it
reached 1,050 or so, in 1972), it immediately fell back. It took
another 10 years before the DOW broke the 1,100 barrier. Six years
for the DOW at 985 to break 1,000. Another 10 years to break 1,100.
A total of 16 years to add a mere 115 points on the DOW.
So, is the 11,000 barrier in the DOW today similar to the 1100
barrier of times-gone-by? Will 11,000 on the DOW become a 16 year
barrier? Could be! Then again, maybe not! I don’t know! “He, who
could foresee events etc.” In the meantime, I will continue
watching my dividend income continue to grow and grow and grow and
grow and grow!
About the Author
Charles M.
O’Melia is an individual investor with almost 40 years of
experience and passion for the stock market. The author of
the book ‘The Stockopoly Plan – Investing for Retirement’;
published by American-Book Publishing. The book can be
purchased at his website.
Visit Charles'
website at
http://www.thestockopolyplan.com. |
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