Is this the beginning of a major stock-market correction?
More investors are bracing themselves as if it were so. The latest reading of the Association of Individual Investors (AAII) Sentiment Index shows that bearish sentiment extended its streak of above-average readings to a sixth-consecutive week.
Prices weigh on sentiment. Stock prices have trended lower over the past six weeks. All the major market barometers have lost ground.
So, is this the beginning of a major market correction?
I don’t know . . . and neither does anyone else. We can all guess how interest rates, trade wars, midterm elections, and political imbroglios will impact stock prices. We can’t know, therefore, we can’t forecast with actionable certainty. Markets impress me, most of all, by their stupefying complexity. The constant interaction of diversified individuals upon a fluid, protean environment produces outcomes that are beyond all ordering and ticketing.
I’ve long ago ceased to concern myself with vetting forecasts. Stock strategy is my concern. The right stock-investing strategy will lead you to Promised Land through thick and thin.
My stock-investing strategy centers on dividends. I’m a vociferous, if not obnoxious, proponent of dividends. Investing for dividends is investing, everything else is speculation.
When investing for dividends, I take the long-view. I know that at as long as the dividends flow wealth will inevitably accumulate.
I offer two different dividend stocks to prove my supposition. Both are long-time recommendations at High Yield Wealth.
Ares Capital Corp. (NASDAQ: ARCC), a business development company (BDC), has been a High Yield Wealth recommendation since February 2011. Ares has paid a high-yield dividend since we first recommended its shares. The dividend has been increased three times. The dividend has been supplemented with special quarterly dividends along the journey.
Ares Capital shares have traded as low as $12.75 and high as $18.50 over our recommendation period. The dividend yield has been as low as 8% and as high as 12%. The average yield has been 9% over the past eight years.
Ares shares trade near our initial recommendation price. They yield 9% today. Meaningful share-price appreciation has yet to materialize. It likely never will.
That’s OK. Ares Capital is bought for consistent high-yield income, not share-price appreciation. . As for income, investors have collected nearly $12 in dividends per share since February 2017. Seventy percent of the purchase price has been returned as dividends. Ares Capital has served its function as a high-yield, reliable income provider.
Altria Group (NYSE: MO), is another long-time High Yield Wealth recommendation. The maker of Marlboro cigarettes exemplifies the power of buy-and-hold when combined with dividend growth.
We first recommended Altria Group in September 2011. Altria Group paid per-share dividends of $1.52 at the time. Altria Group shares were priced at $27.26 when we offered our initial recommendation. Altria Group’s dividend offered a 5.6% yield.
Thanks to relentless annual dividend growth, Altria Group pays $3.20 per share in annual dividends today. The dividend yields 11.7% on our $27.26 cost basis. We’re guaranteed at least an 11.7% annual return.
As the dividend goes, so goes the share price. Altria Group shares are priced near $60 as I write. The price has doubled since our initial recommendation.
Ares Capital Corp. has generated a 70% total return since our initial recommendation.
Dividends are the source of all Ares Capital’s returns. Ares Capital has performed as expected. We expected a 9% average annual return. That’s what we got.
Altria Group has generated a 180% total return since our initial recommendation. The return is an admixture of dividend growth and share price appreciation.
Altria Group has delivered nearly $15 in dividends per shares since our initial recommendation. Its share price has more than doubled.
Where is the stock market headed?
I don’t know, nor do I care. I know my investing strategy will see me through thick and thin. I know my stock strategy is as good as any at generating long-term wealth. Why bother with forecasts?