|New Threads Only:|
|New Threads & Replies:|
Forum List » Income Investors' Forum|
Ideas for Income Investors. High Dividend Stocks, Mutual Funds etc.
How to Buy Dividend Stocks at the Bottom
Posted by: Dividends4Life (IP Logged)
Date: August 7, 2013 09:29AM
Everyone loves a deal and loves getting something at a rock-bottom price. Dividend investors are no different. However, as long-term buy-and-hold investors, we aren't known for our ability (or desire) to time the market and call the bottom. That's not to say we can't enjoy the benefits of buying at the bottom. So, how does a long-term buy-and-hold investor accomplish this?
It is really quite simple, if you systematically invest during the good times and the bad. Easy to say, and do, when things are going well, but many people have a hard time buying into a market that has been declining for an extended period of time. To the contrary, many investors sell their positions and move to cash when things look bad. Then move back into equities once they rise for a period of time. Sell at the bottom and buy at the top is not how to make money in the market.
Many observers point to March 2009, when the S&P hit its low, as the bottom of the most recent market downturn. If you were following a disciplined approach and bought that month, you most likely are sitting on some incredible gains. Consider the stocks I purchased in March 2009:
The Coca-Cola Company (KO) | Analysis
- March 2009 Price: $19.845 (split adjusted)
- Recent Price: $40.64 up 104.79%
- Current Yield: 2.8%
- Yield-on-cost: 5.6%
3M Co. (MMM)
- March 2009 Price: $47.88
- Recent Price: $116.38 up 143.1%
- Current Yield: 2.2%
- Yield-on-cost: 5.3%
Wal-Mart Stores Inc. (WMT) | Analysis
- March 2009 Price: $48.42
- Recent Price: $78.11 up 61.3%
- Current Yield: 2.4%
- Yield-on-cost: 3.9%
Buying at the bottom is great, but buying near the bottom isn't bad either. Consider these stocks that I picked up in April 2009:
Chevron Corp. (CVX) | Analysis
- April 2009 Price: $68.97
- Recent Price: $126.09 up 82.8%
- Current Yield: 3.1%
- Yield-on-cost: 5.8%
McDonald's Corp. (MCD) | Analysis
- April 2009 Price: $55.09
- Recent Price: $97.73 up 77.4%
- Current Yield: 3.1%
- Yield-on-cost: 5.6%
Granted, the technique works the other way also, in that systematically investing each month will guarantee you will buy at market highs (note I didn't say at the top). Comfort can be taken in that every protracted downturn will eventually produce an absolute bottom (i.e. a point that will never be touched again). However, throughout history highs have constantly been exceeded. Thus, there are no true tops, only recent highs. Any long-term dividend investor will tell you that the yields are better at the bottom, so forgive me for smiling the next time the market crashes.
Full Disclosure: Long KO, MMM, WMT, CVX, MCD. See a list of all my dividend growth holdings here.
- 9 High-Yielding Mega-Cap Stocks
- Best Stocks for 2013
- Dividend Investors Should Focus On Stocks, Not The Market
- The Secret Ingredient of Dividend Growth Stocks
- 9 High-Yield Stocks With A Low Price To Book
Stocks Discussed: KO, MMM, WMT, CVX, MCD,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.