Bad News for Stock Markets Makes Good Dividends Easier to Spot

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The big news this week has been a series of losing days on the stock market. U.S. stocks have been retreating on uncertainty related to what’s happening in the euro zone, as well as what’s next for the U.S. economy. With Nobel laureate economist Paul Krugman predicting that the chances of a global recession are at 50% right now, and with investors fairly certain that more political gridlock is on the way over President Barack Obama’s latest jobs plan, there isn’t a lot of hope to go around. The markets dislike uncertainty, and right now, everything seems fairly uncertain.

However, in terms of dividends, the disappointing stock market performances of the past week actually provide some positive news: It’s easier to spot good dividend yields. Indeed, thanks to dropping stocks, the Wall Street Journal reports that about 25% of the S&P 500 pay dividend yields of more than 3%. Now is a great time to do a little bargain hunting for great deals on slow growers. Some of the possible choices for significant gains — when you include dividends reinvested — include:

  • Chevron (CVX): Returns of almost 200% with dividends reinvested.
  • Consolidated Edison (ED): Returns of about 128% with dividends reinvested.
  • Altria (MO): Returns of more than 300% with dividends reinvested.

The Wall Street Journal points out that that these are gains over the last 10 years, and they have more than outpaced returns of the S&P 500 with dividends reinvested. The point is that now, with the stock market struggling, you can more easily spot higher yields — and pick the stocks up at bargains.

It will be interesting to see what happens next. Volatility is likely to continue, but there are ways to reduce your risk. Looking for solid dividend stocks can be one way to improve the chances that you avoid some of the worst of the issues related stock market volatility, and now might just be your chance.