Let me explain…

For many people, this stock market drop is scary. No one likes when stocks go down. And for the most part, neither do I. But there’s another side of the story if you’re interested in income investments…

Sure, the S&P 500 has fallen 10%. But its dividend yield has jumped 20 basis points, to 2.05%. That’s a huge jump in less than a month. We’re seeing many borderline yields — the ones too small to mess with — come back into our potential investment range.

Let’s use Wal-Mart Stores Inc (NYSE: WMT) as an example. Wal-Mart is one of the safest bets on all of Wall Street. It may not go straight up, but it’s certainly safer than most retail plays. And if you could collect a reasonable dividend payment, it’d be worth holding through any market. Unfortunately, it just isn’t that large of a payer.

But as the broad market continues to decline, Wal-Mart’s relative payout is looking more and more attractive. After all, the company’s share price is an afterthought if you can cash in a respectable dividend. So as shares of Wal-Mart continue to drop (they’re already down more than 4% in the last quarter), the cash payouts collected by shareholders continue to become a larger percentage of your initial investment.

If this trend continues, we may be able to swoop in and pick up shares of Wal-Mart and lock in a dividend yield higher than it’s ever been before.

We aren’t there yet. And this isn’t necessarily a buyer’s market just yet. But as we enter a period of market stagnation, which we expect will happen in coming months, we might be able to lock in WMT with a yield approaching 3%. I’ll let you know if that time ever comes.

As you can see in the chart, higher dividends with lower stock prices can make all the difference. 2.4% is the highest dividend yield WMT has ever paid out – and incidentally, the stock’s price is at the highest level in history as well. Those two factors mean that any drops in Wal-Mart’s price will deliver a materially greater impact on the company’s yield.

But as attractive as Wal-Mart may be, I think that some of the ignored dividend plays on the market right now already offer impressive opportunities for the investors who know about them. That’s exactly the message I’ve been sending to my Lifetime Income Report readers lately – the difference, of course, is that I’ve already sent them my favorite ignored dividend stocks right now.

But there’s still time to take advantage – if you want the names of my favorite high-yielding stocks, learn more about Lifetime Income Report here…

Sincerely,
Jim Nelson
Penny Sleuth

June 10, 2010

Dividend Strategy: Why Falling Prices Could Be Very Good for This Retail Giant was originally featured in the Penny Sleuth.

Below is a chart of the top three penny stock performers during the past year. Two of the companies are in the business of gas and oil exploration, and the other is in the wireless telecom industry. Two of the stocks have a market cap of under $20 million, and all three have amassed some great returns this year:

While TSYS has held its value very well amidst the economic crisis, New Concept and Mexco both hit their 52-week high back in May, and have since given back much of their returns. If you’d bought Mexco last December, however, and sold when the stock hit $50 five months later, you could’ve claimed a 1,135% return!

Shares of New Concept could’ve been had for $1.50 last December. When the stock spiked to $12.75 earlier this year, investors had an opportunity to cash in on a 750% gain. Despite the hit these stocks have taken in the past six months, they are still giving last year’s buyers a nice return on investment at their current levels.

Now, for comparison sake, lets take a look at the top performing stocks from the Dow Jones over the past year:

As you can see, only two of the 30 stocks in the Dow have had a positive return over the past 12 months. Wal-Mart has been the Dow’s best performer by far. The third best, Johnson & Johnson, is currently sporting a -9.73% return over the past 12 months.

Now, you may be wondering what penny stocks, if any, have performed well since during the recent market turmoil. Well, you maybe surprised to learn that a few small caps have done quite well despite the market meltdown. The top penny performer over the past three months is in the outsourcing business, the runner-up is a provider of competition management services, and the third is a pharmaceutical company that focuses on prescription drugs for central nervous system (CNS) disorders:

All three of these stocks have posted some remarkable gains over a short amount of time, especially when placed in the context of the recent market collapse.

The Dow, by comparison, has two positive performers over the past three months, although their gains are much more modest:

Exxon and McDonald’s have done very well to post any gain over the past three months, particularly considering the Dow Jones Industrial Average is down 23% during that same time period. Despite outperforming their peers, Exxon and McDonalds can’t hold a candle to the returns of this quarter’s top penny stocks.

These comparisons very clearly illustrate the profit potential that these un-diluted penny stocks bring to the table. The blue chips rarely see such explosive growth over such a short period of time. And even in one of the biggest collapses the market has ever seen, you can still find some great penny stock buys. You’ve just got to know where to look.

Best Regards,
John Schuler

December 08, 2008

P.S.: To get a jump-start on the top penny performers of 2009, check out Penny Stock Fortunes. In their December issue, Greg and Jim have found four cheap stocks that would be considered bargains in any market.

The Year’s Top Penny Stock Performers was originally featured in the Penny Sleuth.