Finding potential bargains is one of the hidden joys of stock market disruptions. (And seeking bargains is a core principle for us!) Sometimes, economic setbacks affect the value of enterprises that are actually quite durable, companies that will probably survive and ultimately prosper.
We noted a few months ago that bargains had emerged among those providers of basics—like food, clothing, and shelter—and that we were likely to still need these things in the future.
Now we are noticing another benefit to some of these prospects.
Dividend yields in the 3% range in name brand companies, although not guaranteed, offer the opportunity for actual recurring investment income. You know another one of our core principles is owning the orchard for the fruit crop. Well, a share of ownership in a profitable enterprise, when some of those profits are distributed as dividends to the owners, can be like owning an orchard.
While the value of the orchard (or the ownership share) will fluctuate, the crop (or the dividend) may be a sufficient reason to simply own it.
Why are we mentioning this now? Income-producing investments may be a way to offset the twin Federal Reserve policies of near-zero interest rates combined with the intent to raise the cost of living by 2% per year. (Officials speak of wanting to “hit a 2% inflation target,” but that is just another way to say “increase in the cost of living.”) When savings is earning less than the inflation rate, purchasing power erodes day by day.
Let’s keep our eyes open.
Clients, if you would like to talk about options for your cash or any other portfolio issue, please email us or call.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
Want content like this in your inbox each week? Leave your email here.