Value Investing / Main Index / previous

January, 2018


With the stock market making new record highs every day or so and already by several measures overvalued, knowledgeable investors might be frustrated that there are not many great opportunities available. Yet, it is seldom advisable to be completely out of stocks unless one's investing time horizon is fairly limited. There is no telling just when a market's sellers will outnumber buyers and so precipitate a major downturn. This bull market could continue for a few weeks, months, or even years. Meanwhile, a long-term investor might at least focus on relatively safe equities. Over the decades, what matters most to investors is probably how much income his or her portfolio offers, both that provided by capital appreciation and by their stocks' total yield. The latter can be secured in both up and down markets, so long as the companies in which we invest are unlikely to fail or cut their dividends.

It seems reasonable, then, even at fairly lofty market levels, to put a portion of one's assets into sound companies with a bit above average yield, then invest enough each year to guarantee growth of that income stream. For example, if one began with income from stocks of, say, $1000 a year, this could be increased through new investing or the companies raising their dividends, which tends to occur rather regularly among profitable corporations. Should this growth in income be at a rate of, for instance, 13% a year, that initial $1000 in annual dividends would become almost $40,000 ($39,150) after 30 years, i.e. a compounded doubling of one's income roughly every 5.65 years. Such income gains would be independent of the rise or fall of the total market price of one's portfolio, in that sense a risk-free standard by which to assess one's progress as an investor.

With the stock market's annual dividends now averaging only about 1.90%, I have looked for very low risk stocks that offer 2.0% or better yields as well as above average long-term total return prospects, excellent financial strength, and recommendations for their purchase from one or more well respected investment services.

Low Risk Dividend Stocks for a High Risk Market

CVS HealthCVS$79.502.50%
Franklin ResourcesBEN$44.902.10%
Infosys, Ltd.INFY$18.122.20%
Walgreens Boots AllianceWBA$75.782.10%

At the table, please find a selection of such stocks. On average, they are likely to double one's investment on a total return basis in the next 5-6 years, meanwhile providing average dividends of 2.30% annually, perhaps not a bad way to wait out the "irrational exuberance" that might be playing out at this time. Once the inevitable next market correction has created new bargains, one's portfolio can be enhanced with more lucrative prospects. Till then, one could do much worse than to double one's dividend income every five years or so while also seeing on average a rising portfolio. By contrast, reasonably safe bonds with decent income offer far lower total return potential than financially strong company common stocks.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

Value Investing / Main Index / previous