Market Wrap-Up for Apr.19 (QCOM, PM, TRV, VZ, SWK, YUM, more)

The stock market had been running higher early in the day, but the reality of a weak existing home sales market eventually spooked some investors to the sidelines by the close. Corporate earning once again took center stage.

Looking at the list of stocks running higher on the back of their earnings results, were names like Peabody Energy (BTU), Marriott International (MAR), Travelers (TRV), UnitedHealth Group (UNH), PPG Industries (PPG), and Verizon (VZ). Of these names, coal producer BTU may be nothing more than a “dead-cat” bounce, with the stock hovering right around 52-week lows.

On the flip side, investors did some selling in names like Stanley Black & Decker (SWK), Nucor (NUE), Qualcomm (QCOM), Yum Brands (YUM), Union Pacific (UNP), and Phillip Morris International (PM). Much of the selling in stocks like YUM, UNP, and PM can be likely related to the recent run the stocks have been on. QCOM and SWK, to a lesser degree. Nucor is interesting, as its yield is around 3%, but commodity stocks are not hesitant to cut their dividend payouts at the first sign of trouble, making us a bit more careful when considering the sector for recommendations.

If you haven’t seen them yet, we published a plethora of articles this morning covering all the recent big-name earnings reports. Here are some highlights:

For more breaking news and earnings reports, check out our main news page, The Dividend Daily.

Where Will Your Retirement Income Come From?

U.S. News and World Report recently penned a piece about the various sources of retirement income. The article included interesting and eye-opening data supporting the need for individuals to get started looking for income-producing assets sooner, rather than later.

The majority of retirees (65 percent) get half or more of their income from Social Security. And over a third (36 percent) of people age 65 and older receive at least 90 percent of their income as a monthly Social Security payment. We have talked about this trend in the past, and how the amount received from the social security program does little to ensure any decent financial comfort level in one’s later years.

Some current retirees still have access to private pensions or annuities (27 percent) or public pensions (15 percent), like those provided by the military or federal, state, or local government. The median pension received by those age 65 and older was worth $12,700 in 2010. Former government employees’ pensions net a higher annual average of $20,000. With many more companies tightening the strings on fixed costs, pensions as a retirement option are slowly disappearing, pushing the focus of retirement income back toward the individual.

As far as older people who are continuing to work, the latest data shows that just over a quarter (26 percent) of Americans age 65 and older held a paid job or were self-employed in 2010. However, the average annual earnings for those 65 and older who continued to work was $28,000. This total isn’t exactly a large amount, but when one has little savings/investments to fall back on, continuing to work becomes a must. Older folks must also bet on their health holding up in order to continue to work, which unfortunately isn’t possible for a number of people.

Lastly, when it comes to income from assets, just about half of seniors (49 percent) received interest from assets held in bonds, treasury notes, IRAs, certificates of deposit, and interest-bearing savings and checking accounts in 2010, while only 19 percent of retirees received dividend payments from stock holdings and mutual fund shares. Real estate property income came in near the 9 percent level. It may be a bit harder to keep up with tenants’ demands as one gets older, so I’m not surprised that real estate is not a huge factor for retirement income. Obviously, there is definitely room to grow in the dividend income area, especially with record-low interest rates continuing to deplete many savers’ holdings.

With inflation always pecking away at your buying power, you need to go beyond the “safety” of essentially zero returns in the banking options mentioned above. Quality dividend plays are able to continue to grow profits in times of higher inflation, and then pass them on to shareholders, allowing many to keep up with inflation. Whether you are of retirement age or not, you must consider this information pertinent to planning your future income options appropriately.

Don’t Run out of Money

I often get asked about the best ways people can maintain their current lifestyle when as they approach retirement. The big thing to remember later in life is to never put yourself in a position where you have to roll the dice in order to make ends meet. You need a fairly conservative investing and spending plan.

Getting into a habit of buying income-producing assets is critical. Try to generate as many sources of income as possible, whether through dividend stock investing, real estate with positive cash flow, and perhaps the idea of “buying a job” if you need even more. “Buying a job” refers to working for yourself if your health allows it (and even if you have physical restraints you will have options). You can consider buying a franchise business, which many older individuals have shown tremendous interest in. Recent data from those attending franchise expos show those 50 and older make up nearly 25% of the audience.

Of course, buying a franchise means financial hoops to jump through. Generally speaking, the more established the franchise, the more money in terms of a down payment you’ll be expected to come up with. Just a simple Google search for “franchise opportunities” will present you with plenty of information to chew on.

With the employment situation being as tricky as it has ever been, the idea of “buying a job” isn’t as peculiar as it may sound. You can file this strategy under “investing in yourself.” Just make sure you are prepared to work hard, and do your homework before jumping into anything. Finally, factor on building your nest egg to a point where you can either pass the business on to someone in the family or sell it outright.

So as you get older, the number one rule to remember is not to run out of money. Plan wisely and bet on living a lot longer than you think. Stay as active as you can, and don’t get too caught up in the endless media coverage of every little movement in the markets.

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25 Years of Dividend-Increasing Stocks

We recently updated our list of dividend stocks that have been paying out dividends for 25 years or more. Be sure to check out the latest list of names here.

Dividends Really Matter

Financial blog recently took a look at the difference dividend payouts made in the overall return investors saw throughout the prior decades. Here are some of the highlights:

- The Nasdaq is down 28% since the end of 1999. Even the “blue chip” S&P 500 stocks are down 15% during that time frame…until you add back those “boring” dividends. With dividends included, the S&P 500′s 15% loss flips to a 6% gain.

- Without dividends, the S&P 500 index would have produced a loss for the 25 long years from August 1929 to August 1954. Then again, without dividends, the S&P 500 produced a 5% loss during the 13 years from September 1961 to September 1974. But with dividends included, the S&P’s loss became a 46% gain.

- Over the course of the last half-century, dividends have contributed more than half of the stock market’s total return — 56%, to be exact.

Of course, you can’t discuss the potency of dividend investing without making mention of how awesome compound returns are. I can’t stress enough the power of compound interest: you take a small amount of money and turn it into a large amount over time. Finding the right companies at the right price points which not only grow earnings, but also grow their dividend payouts as well!

New Watchlist Article Out Today

Be sure to check out our weekly Top 50 High-Yield Watchlist Names post that is out today, exclusively for Premium members. This list gives readers a good idea of what stocks we’re watching behind the scenes here for potential upgrades.

Go Beyond This Newsletter

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Thanks for reading, and I’ll see you tomorrow!

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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