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Dividends For Consistent Returns

The Dynamic Wealth Report
January 2, 2008

Surviving A Strike

“I wish they would end the strike. It’s just stupid,” lamented Mark.  I just met him on the golf course and we were in deep discussion.  He joined our golfing group and turned out to be a pretty good golfer.  As we chatted, we discovered we would also be at the same New Years Eve party.  It’s a small world.

Like most encounters with new people, discussions drifted toward careers.
Mark is connected to the television and movie industry.  He is far from a big-shot Hollywood star but when he speaks about his work he clearly has passion.  His career started with a popular sit-com in the 80s and eventually he worked on a few movies.  He plays an integral part in getting these shows to the screen.

Now, the writers’ strike has been going on for awhile.  Predictions of a short strike and quick return never materialized.

As such, the strike went on.

Guys like Mark are proud and strong.  He would never admit it but some of his colleagues are struggling.  Incomes have gone to zero and opportunities to find temporary employment are few and far between.  Mark took a long overdue vacation.  Now the relaxation he experienced has been replaced by stress.

Clearly some are faring better than others.  Before the unions agree to a settlement, we could see many more months pass by.  Now, this situation begs the question:

How can striking workers like Mark hold out until their demands are met?

I spoke with Mark extensively about his career and financial predicament. He had an interesting way of molding his financial needs to his investing strategy.  He realized early on that he needed to focus his investments on income generation.  In a word, he needed dividends.

Now, it's not an exotic solution.  Dividends won’t turn people into millionaires overnight, but they're traditionally safe and stable.  And that's something Mark and his colleagues desperately need at the moment.  The prospect of not having an income for awhile can be very frightening.

So how did he stabilize his life and fears?

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Mark focused on using his investment dollars to replace part of his lost income with dividends.  I know, it sounds easy but believe me it’s not.  The key is not to rush out and just buy the highest yielding dividend stock you can find in the Wall Street Journal.

That will only get you into trouble.  If you did that a month or so ago,
you would be holding stocks like Washington Mutual.  Stocks that had artificially inflated dividends due to their stock price falling off a cliff.        9 times out of 10, these companies cut their dividends.

Instead, I recommend focusing on long-term dividend growth.  Look for companies who've paid dividends for years and increase them over time. These are typically solid businesses that provide very stable returns and reasonable growth.  Reinvesting the dividends also provides a nice boost to yields down the road.

Mark was smart to start this investment strategy a few years ago (as strikes are a constant in his business).  He allowed his investments in dividend stocks to grow slowly over time.  Now he has the confidence and security of knowing that dividends have replaced much of his lost income.  That’s how he’s surviving the strike (and taking care of his financial future at the same time).

If and when things get more turbulent with the stock market and economy, dividends may play a role in helping investors see through it.  They have in the past and you can bet they will in the future.

 Commodity Watch 

•   Wheat ($8.85 per Bushel)

Wheat crossed the $10 per bushel mark last week but retreated to the $8.85 level.  News from India of a stronger than expected wheat harvest drove futures prices down.


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Issue Date:
 Wednesday, January 2, 2008


Notable Highs and Lows

•  Murphy Oil (MUR) the oil and gas exploration company reached a new 52-week high of over $85.  The company now has a market cap in excess of $15 billion.

•  Arch Coal (ACI) reached a new 52 week high of over $45 per share.  One of the nation’s largest coal producers, the company now has a market capitalization in excess of $6 billion.

 Ford Motor (F) hit a new 52-week low of under $6.75 on news that automotive sales in 2007 were the weakest in a decade.  The company has a market cap of just over $13 billion.


Quote of the Day

"Fear causes you to panic and sell at the bottom, while greed motivates you to buy near the top.
                           -Stan Weinstein


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China Stock Insider


Best Performing Sector

Sector Gain
Farm Products 47%
Metals Mining 35%
Agriculture Chemicals 33%
Oil and Gas Drilling 30%
Music and Video Stores 19%
*Last 30 days


Worst Performing Sector

Sector Loss
Sporting Good Stores 35%
REIT -Hotel/Motel 32%
Toy and Hobby Stores 31%
Credit Services 28%
Lodging 24%
*Last 30 days


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