Dividend paying stocks have been overlooked for too long - it's time to give them their due.
[caption id="attachment_55289" align="alignright" width="300" caption="Even Apple has gotten the message about dividend paying stocks."]
[/caption] During the dot-com boom of the late 1990s, tech companies like Apple ( AAPL , quote ), Microsoft ( MSFT , quote ) and Intel ( INTC , quote ) did not pay dividends. Their boards of directors felt that their billions in cash were better spent on research and acquisitions than on rewarding shareholders.
Dividends are important to the total return of a stock though. According to Vanguard mutual fund founder John Neff, the income component of an equity provides more than 40% of the total return.
Since 2000, dividends have been even more important. The stock markets have been flat, and dividend paying stocks have provided the only positive return.
At present, the average dividend on the Standard & Poor's 500 Index is around 2%. For an Asian stock, the average dividend paying stock yields around 3%. The historical average payout ratio -- the funds left over from earnings after paying a dividend -- for a member of the S&P 500 has been around 50%.
The payout ratio says a great deal about the management of dividend paying stocks. According to investment manager Jesper Medigan, a dividend payout ratio of around 40% shows that company management respects the rights of minority shareholders.
Medigan also says that when Chinese companies have been found to be fraudulent , not a single one had paid a dividend. An income stream is good proof of its overall health - a company can't fake a dividend check.
Dividend paying stocks are particularly attractive when interest rates are low. The Wall Street Journal says that investors have gotten the lion's share of their returns from dividend yields , not dividend growth or capital gains.
This is also true for the shareholders of Microsoft, Apple and Intel. All three companies pay an above average dividend now.
Value manager John Buckingham (CIO, Al Frank Asset Management) says dividend paying stocks are the best bet for a tentative market.
3 Stocks to Watch Right Now - Motley Fool
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The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?
Enter your email address below to find out what made Jobs so enraged!
US stocks end at 1-month high - Independent Online
US stocks recorded their third big gain of the week and closed at a one-month high Friday because of expectations that the central banks of countries around the world will step in to limit the damage from a debt crisis in Europe.
The Dow Jones industrial average climbed 115 points.
Now investors wait for a crucial election on Sunday in Greece that will help determine whether that country stops using the euro as its currency. Such an exit would destabilise financial markets.
Mario Draghi, president of the European Central Bank, said his institution stood ready to support Europe's banking system by continuing to lend money to solvent banks. He also appeared to leave open the possibility of an interest rate cut.
Draghi said in Frankfurt that the ECB has a “crucial role” in extending credit to banks in times of instability, when banks can't always borrow money on financial markets.
On Thursday, Reuters reported that ECB, the Federal Reserve, the Bank of England and other global financial authorities were ready to act in concert to limit the fallout from Greece.
Investors also are more confident about the election itself, said Peter Tuz, a money manager, at Chase Investment Counsel, which runs mutual funds.
“There's a growing sense of optimism,” he said. “The betting now is that the 'let's stay in the euro' segment of the population will win.”
Borrowing costs for Spain were unchanged. They fell slightly for Italy, an indication that investors are feeling a little better about that country's solvency. They have been worried that Italy will have to seek financial rescue.
The Dow rose 115.26 points to close at 12,767.17, its highest finish since May 11. The Standard & Poor's 500 index climbed 13.74
points to 1,342.84, also its highest since May 11. The Nasdaq composite index rose 36.47 points to 2,872.80.
For the week, the Dow rose 0.9 percent, the S&P 1 percent and the Nasdaq 1.3 percent.
The week included four moves of 100 points or more for the Dow, the first time that has happened since April:
- On Monday, the Dow lost 142 points as enthusiasm faded for a $125 billion rescue of Spanish banks.
- On Tuesday, the Dow climbed 162 after a Federal Reserve official said he supported more measures to stimulate the economy.
- On Thursday, the Dow gained 155, primarily because of late reports about possible coordinated action by central banks.
Energy stocks rose the most Friday. OPEC oil ministers agreed Thursday to keep their production target steady, a compromise meant in part to soothe economically troubled countries.
A pair of weak economic reports helped push Treasury prices up and yields down.
A report on US factory production showed a drop in manufacturing, a key driver of economic growth. A gauge of manufacturing in New York sank to its lowest level since November.
The yield on the 10-year Treasury note fell to 1.60 percent from 1.64 percent Thursday. Traders have been shifting money into the safety of the Treasury market ahead of the Greek election. That higher demand has kept yields near all-time lows.
Among stocks making big moves:
- Microsoft rose 68 cents, or 2.3 percent, to $30.02 following reports that the company is in talks to buy Yammer, a developer of social networks within companies.
- Capital One Financial rose 80 cents, or 1.5 percent, to $53.81 after the company said uncollectable and delinquent loans at its credit card business dropped last month.
- Defense contractor AAR plunged $1.23, or 10.6 percent, to $10.34. The company updated its forecast for fourth-quarter and fiscal-year earnings, and they were weaker than Wall Street expected.
- YPF, Argentina's state-controlled oil and gas producer, rose 72 cents, or 6.9 percent, to $11.17 after Mexican telecommunications billionaire Carlos Slim said he had acquired an 8.4 percent stake in the company. - Sapa-AP
Cartel money laundering cases tough but critical - Miami Herald
McALLEN, Texas -- When it comes to arresting drug traffickers and dismantling organized crime, the investigation into a U.S. horse racing operation allegedly laundering money for one of Mexico's most powerful cartels is rare - and difficult to prosecute.
Unlike most drug busts, the backbone of sophisticated money laundering cases is a complicated trail of paper - reams of bank, tax and property records - that usually take years to track. But hitting organized crime where it hurts the most - the money flow - is the most effective way to shut the crime networks down, investigators say.
"The money is much more valuable to the trafficker than the drugs are," said John Kirby, a former federal prosecutor in San Diego, who worked on money laundering cases against the Arellano-Felix cartel, among others. "If you want to hurt these guys that's how you do it, because that's the end product. That's what they really want. And if you can try to take that away, then you're really having an impact."
During his 10 years in the U.S. Attorney's office, Kirby said he prosecuted hundreds of drug traffickers. "I had eight good money laundering cases. They're just hard."
Chasing organized crime's money flow isn't a new tactic. The same racketeering laws being used against Mexican cartels today are the ones that targeted the mafia in the 1970s. Money laundering was spelled out as a federal crime with a 20-year maximum sentence per count in 1986 as law enforcement officials increasingly recognized that just seizing the drugs wasn't enough to bring down traffickers.
In this latest case, federal agents raided an Oklahoma ranch, a New Mexico quarter horse race track and sites in Texas on Tuesday, alleging a brother of a leader in the Zetas drug cartel was using a horse-breeding operation to launder money. Millions of dollars went through the operation, which bought, trained, bred and raced quarter horses throughout the southwest United States, the indictment says.
Eight people were arrested, including Jose Trevino Morales and his wife in Oklahoma. Two of his brothers and four others remain at large.
"That case will be a model, a blueprint for a long time to come of how we need to take on these 21st-century criminal techniques," said Douglas Leff, who was chief of the FBI's Asset Forfeiture and Money Laundering Unit before recently returning to New York. He expects more cases because of a 2010 Mexican banking law that makes it difficult to deposit U.S. dollars into accounts across the border. That means cartels will do more money laundering in the U.S., he says.
"If we can follow the money successfully, that's going to be the avenue that leads us to the top of the food chain rather than somebody who's just a trusted manager," said Leff, who spent some time on the case while at headquarters.
The government's investigation into the horse operation began in January 2010 with a tip from an informant in Mexico that two Trevinos at the top of the Zetas organization were the real buyers behind two quarter horses that sold for more than $1.1 million at an auction in Oklahoma City, according to court records. The IRS had its own investigation of Jose Trevino, and the investigations merged in February 2011.
Usually the drug cash was smuggled back into Mexico and run through currency exchanges for an initial rinsing. Then the Trevino brothers recruited Mexican businessmen to wire payment or write checks for horses bought in the U.S. to make the transactions appear legitimate. They would reimburse them in cash. At other times, workers for the Zetas' Dallas cocaine distributor passed drug cash directly to Jose Trevino - at least once at a Wal-Mart outside Dallas - cutting out the return trip to Mexico, court records say.
Saudi Stocks Drop After Death of Nayef - Businessweek
Saudi Arabia’s benchmark stock index dropped to its lowest level in a week after state television reported that Prince Nayef, the kingdom’s interior minister and crown prince, had died.
The Tadawul All Share Index (SASEIDX) fell 0.3 percent to 6,724.46 at the close in Riyadh, the lowest since June 9, after earlier dropping as much as 2.7 percent.
Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals maker, slipped 0.6 percent to 89.75 riyals. Al Rajhi Bank (RJHI), the kingdom’s largest lender by market value, declined 1.4 percent to 72.75 riyals.
The Royal Court statement cited by state television didn’t give a cause of death. Nayef had left the kingdom for medical tests and a holiday last month, the Royal Court said in May, without specifying where he was going. He went to Cleveland, Ohio, in March for separate medical tests. About 602 million shares traded in Saudi Arabia today, almost double the 12-month daily average of 317 million, data compiled by Bloomberg show.
“There was some panic-selling because of the uncertainty created by the reports,” Turki Fadaak, head of research at Albilad Investment Co. in Riyadh, said today by telephone. “Ultimately, we do not believe the stability of the kingdom will be threatened.”
Mideast Turmoil
The death of Nayef comes as the world’s largest oil supplier confronts unemployment challenges at home and unprecedented change in the Middle East after popular uprisings toppled leaders in four countries, including Egypt and Libya last year. King Abdullah unveiled a $130 billion spending plan in the first quarter of 2011, including allowances for government workers and salary increases for military personnel.
King Abdullah appointed Nayef as crown prince on Oct. 28 and later named Prince Salman bin Abdulaziz as defense minister. The appointments followed the Oct. 22 death of Prince Sultan, formerly the crown prince. Head of the Interior Ministry since 1975, Nayef was the most powerful prince in the kingdom.
“Now the succession struggle will have to move to the next in line,” Theodore Karasik, director of research at the Dubai- based Institute for Near East and Gulf Military Analysis, said in a phone interview today.
Saudi Arabia’s stock exchange is the only Gulf Arab bourse open on Saturdays.
To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net; Glen Carey in Riyadh at gcarey8@bloomberg.net.
To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net.
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