Stock Ideas 
Stock Ideas Top Headlines Market Update October 9 2007
Stock Ideas Top Headlines Market Update October 9 2007 
Market Watch
|
By Rick Pendergraft Almost all the economic reports due out this week are expected to come in worse than the previous reports. |
|
| More... |
Most Popular
Login Form
| Market Update October 9 2007 |
| Wednesday, 10 October 2007 | ||||||
|
Part of that is axiomatic. You can’t collect the distributions unless you stick around for them to be paid. Individual bonds are the exception because they accrue interest as long as you hold them. But as far as stocks, Canadian trusts, limited partnerships, income-paying funds, preferred stocks or anything else goes, you’ve got be in there on the ex-dividend dates or you won’t get paid. Some traders swear by the strategy of dividend capture. That is buying a security before the ex-dividend date and then selling soon afterward. This will get you the dividend, but it will also get you a much larger tax bill. That’s because the 15 percent rate on qualified dividends doesn’t apply to anything not held at least 90 days.Ironically, the most important reason income investors need to buy and hold is capital appreciation. A healthy, growing company will increase its dividend over time, and its share price will follow. If you’re trading, you won’t get that gain unless you’re very, very lucky. Buying and holding, of course, isn’t without risks. For income investors, there are basically two: credit risk and inflation risk. The former has been on investors’ minds this year. And virtually anything perceived as having too much debt—or too unorthodox a capital structure—has taken hits. There are two ways to protect your portfolio against credit risk. One is by sticking only to high-quality, growing companies and shedding anything where the business fundamentals are weakening. The other is to diversify broadly, both in terms of individual stocks you hold and across market sectors.When the markets are universally panicked about recession or a credit crunch, big institutional money will pretty much sell off anything that doesn’t have the word “Treasury” in it. And that’s exactly what happened on the worst days over the summer. The key in a market like that is to avoid the real blowups, i.e., the companies that are really in trouble. This time around, that was basically financial companies that had gotten in really deep in the mortgage market and/or collateralized debt obligations. As JP MORGAN CHASE’S $5.5 billion writeoff announced today illustrates, there are still some landmines in this area, though that stock is actually up today. In contrast, damage to most other income investments in recent months was largely because of guilt by association. Limited partnerships (LPs), for example, were walloped by concerns about their debt structures and whether or not they’d be able to access capital markets. Both fears have proven largely groundless, at least for the best quality LPs. As a result, money is starting to flow back in and shares are recovering.The lesson: If you avoid the blowups in an environment of elevated credit risk, your losses will be short-lived. In fact, such times are golden opportunities to buy high-quality income stocks cheaply. Source : Utility and Income This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
|
||||||
| < Prev | Next > |
|---|