Don't Forget the Role of Dividends
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Tim Lambert
Don’t Forget the Role of Dividends
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When asked when was the best time to buy stocks, legendary investor Shelby Davis would always reply,”Whenever you have the money.”

With the Dow Jones Industrial Average (NYSE: DIA) down 2.2 percent for 2014 after last year’s bull market, some investors are probably thinking about cashing in and taking profits.  While the allure of that is certainly understandable, a far better tactic would be to load up on dividend paying stocks such as Coca-Cola (NYSE: KO), McDonald’s (NYSE: MCD), Exxon Mobil (NYSE: XOM), and Caterpillar (NYSE: CAT).

Those are all blue chip stocks that pay above average dividends.

Also of great importance is that all have a history of dividend growth.  For the long term investor, that is very important.  Legendary Investor Jack Bogle points out that dividend income provides 45 percent of the historic total return of stocks.  Many sectors such as Big Oil and consumer goods are known for having solid dividends.  Many articles on this site have detailed the appeal of Big Oil Stocks for this purpose, among many others.

All of these companies has a global presence.

Coca-Cola products are found in every country except for Cuba and North Korea.  The largest oil and natural gas entity, Exxon Mobil is well positioned to prosper from the rising global demand for energy.  Caterpillar is the world’s largest heavy equipment maker.   With its golden arches rising in more than 100 countries, McDonald’s will benefit from the expanding consumer class in emerging market nations.

Due to the stability and strength of the enterprise of each, all can continue to pay and increase dividends.  That income stream is very important when stocks are slumping.  When the market is down, dividend incomes provide the only positive element of the total return.  For an investor, that is a very compelling reason to hold on for the long term.


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