Actually, investors for the long term should always buy “Dividend Aristocrat” stocks such as Coca-Cola (NYSE: KO), ExxonMobil (NYSE: XOM), and Wal-Mart (NYSE: WMT), among others.
A Dividend Aristocrat is a stock that has increased its dividend annually for at least the past 25 years.
Dividend stocks should be a part of every portfolio, not those owned by those who are investors. Dividend income has provided over 40 percent of the total historic return for equities. It provides a foundation for any stock portfolio. In negative market conditions, it is the only source of a positive return.
That could be transpiring with the Federal Reserve announcing that it would end quantitative easing.
This is the policy of a central bank buying government debt that no other investors want. Quantitative easing is designed to keep interest rates down. Low interest rates help an economy grow by allowing for businesses and consumers to borrow cheaply.
Dividend income stocks also do well in a low interest rate environment. Income investments such as bonds are not appealing due to lower yields. That is especially so for demand deposit savings account and certificates of deposit.
With quantitative easing ending, dividend income stocks are not as attractive.
That should still not keep investors from buying. If anything, dividend income stocks with a history of growth become more attractive as the yield increases when the share price falls. This has happened with stocks such as Coca-Cola in recent market action (chart below).
As a result, Coca-Cola now as a very attractive dividend yield of 2.98 percent.
It is trading close to its 52-week low. The same is true for ExxonMobil and other Dividend Aristocrat stocks. Long term investors should look upon this as an opportunity to buy Dividend Aristocrat stocks when the share price is low and the dividend yield is higher.