This past year was one of many ups and downs in the shop but oddly enough the stock indexes ended the year just about where they started with the S & P 500 index ending down a mere 0.04 points below the beginning of the year. We enter 2012 with a mixed bag of factors. The Us cheaper seems to be getting stronger, but our congress remains as gridlocked as ever. The European financial problems, while temporarily calm, have not been resolved, and will likely rear their ugly heads again. Meanwhile Iran is threatening to blockade the Strait of Hormuz, the only tube way for oil to go from the Persian Gulf to the Arabian Sea. This would stop the flow of oil out of the middle east to the rest of the world. Iran is development this threat as a counter to Europe and the Us addition sanctions to preclude them from building a nuclear bomb. This is a very volatile, unpredictable, and dangerous situation with no easy solution. Hopefully calm heads will prevail. With the death of Kim Jong Il in N Korea no one knows how his son Kim Jong Un will act as the new leader of this wayward communist country. Initial indications are that he will be as despotic as his father...time will tell. Domestically, interest rates are at historic lows, unemployment rates are arrival down, albeit at a glacially slow rate, holiday retail sales beat expectations, corporate wage have been commonly good, forces have returned from Iraq, the Occupy Wall road movement has caused the populace and congress to stop and think, and of course it is an determination year. Just like last year, we enter 2012 with no clear direction and many many variables most of which are unpredictable, all of which will impact the markets.
There are some things that are predictable. The Fed has told us that they will not be raising interest rates until 2013, so it is uncostly to believe that the current favorable rate environment will stay as it is for at least the next 12 months. This is good for all borrowers, and good for businesses large and small. On the short term it is good for high compliance equities that are interest rate sensitive such as Mortgage Real Estate speculation Trusts, company amelioration companies and Oil and Gas expert diminutive Partnerships. The tricky part is that when rates start to rise, which they will eventually, these high yielders will be impacted negatively. When the shop begins to anticipate arrival rate increases these shares will most likely drop ahead of the interest rate increase by in any place from 6 to 12 months in advance. So now is a time to be very vigilant and perhaps to begin paring down investments in these asset classes. Clearly bonds will be hit the same way in as much as low interest rate paying bonds will suffer valuable capital losses when new bonds are issued with higher returns.
Nuclear Power
It is also uncostly to believe that the world's current dependence on fossil fuels will continue for at least the near term future. It is likely that the Us will be development major moves to become less dependent on oil from the middle east and will enhance our energy relationships with Mexico and Canada, but most importantly, the Us will likely allow the stepping up of domestic production of both oil and natural gas. With the amelioration of new "fracking" techniques and the exploitation of Bakken shale, Marcellus Shale, Utica Shale, and other new finds in oil and gas, it is very likely that the Us will not only significantly reduce its dependence on the middle east, but may become net exporters of natural gas and liquid natural gas. This will mean a build up of the drilling, pipeline, warehouse etc. Infrastructure and will be a boon to this industry.
We know for sure that this is an determination year. I will not make any predictions about the supervene of the election, but I do know that every incumbent believes that reelection is more likely when the cheaper is strong and growing. Additionally enhancing consumer confidence bodes well for those seeking reelection and both the White House and our congress will do everything in their power to enhance the economy, reduce unemployment and raise consumer confidence so that those in power will remain in power.
We also know that there are many large blue chip companies that have been growing over the past 10 years, quietly raising their dividends, addition productivity and addition globally yet their stock prices have remained in the doldrums. You have to look no supplementary than our largest retailers and biggest conglomerates to see this. My experience has been that "water always seeks its own level" and that in the end strong fundamentals will overcome everything else, meaning that we should expect to see some strong movement among some of the biggest and the best blue chip stocks. A diminutive investigate will show you exactly where. Such lists as Dividend Aristocrats, Dividend Champions, and for that matter the Dow 30 are good places to find plenty of these "under-performers."
There continues to be plenty of opening in "accidental" high compliance stocks. These are stocks that have declined along with the market, or with their segment, but on an private basis have maintained strong fundamentals. The qoute is that not all high compliance stocks are accidental high yielders. Many are high compliance because they are high risk. The key for each private investor is to determine his or her own tolerance for risk and then do the required due diligence to find the right equities to meet their own private objectives. Then based on your estimation of the shop begin to deploy your funds accordingly, be it through dollar cost averaging, or some other strategy that you have chosen.
Whether you select to pour through each year reports, 10K's, regular financials, etc. Or opt to spin financial data from secondary sources such as Google Finance, Yahoo Finance, Msn Money, to name but a few of the larger ones, it is foremost that you understand the most basal facts about any company that you are inspecting as an investment. Essentially you should understand what it is that a company does well enough so that you can explicate it to man else. You should know what kind of an operation it is, its management style, pertinent facts about the company's growth, profit, company cycle, risk factors, rating versus competition, etc. There are a number of metrics that are very helpful in rating a company versus its peers, and determining if a single equity meets your own definite criteria. These data points and ratios are available at virtually every financial site which follows equities.
Revenue: Look at the trend. Where is the company in its increase cycle?
Earnings: Is the company development money? Is wage growing or declining? What is the trend for the P/E (ratio of price to earnings)? How does the P/E ratio compare to competitors? What are the Eps (earnings per share)? How much of Eps are paid out in dividends? How much is available for R&D, growth, etc.? It is foremost to note that in some high yield tax advantaged companies such as Real Estate speculation Trusts, expert diminutive Partnerships, and company amelioration Companies, the rules governing their operations are quite different than with most corporations. Other metrics such as hedging, Dcf (distributable cash flow), and interest rate trends may be as foremost to look at as wage when one evaluates these entities. For details on these special tax advantaged companies any crusade engine will contribute in depth data as to their buildings and operations.
Ratio of Debt to Equity: In a salutary company when equity is divided into debt the results should commonly be less than one. Comparison with peers is foremost in evaluating this metric.
Assets and Liabilities: While there is a wide range of salutary or unhealthy possibilities, as a rule of thumb you will want to see assets at least duplicate liabilities. Dividing assets by liabilities results in the Current Ratio which should commonly be at least 2.
Book Value Per Share: considered by dividing the net value of a company by the shares outstanding, the Book Value Per Share is a metric that indicates how the normal shop views the success of that company. If shares sell above book it commonly means that the shop perceives hereafter growth. Sometimes the shop gets it wrong and a company sells below book providing a buying opportunity. different categories tend to have different ratios of book value to share price so it is foremost to spin other equities in the same field when evaluating Book Value Per Share.
Insider & Institutional Trading: Are insiders (corporate officers and others with inside information) buying or selling? Why? Do they know more than you do about the likely hereafter for an equity?
How many times have you heard that what has happened in the past is no guarantee with regard to what will happen in the future? Well, the fact of the matter is that generally, unless you have a crystal ball, past operation is probably the best place to look while determining what may happen in the future. This data is available to everyone, but relatively few take advantage. It is so much easier to plainly buy or sell what your broker or financial adviser suggests, but do they precisely know your tolerance for risk, financial objectives, and speculation parameters? Whose financial interests are they most concerned about, yours or theirs? Are they willing to take the time to produce a definite plan for you, or will they try to fit you into a preexisting "canned" plan that their company is marketing to folks like you?
Given the fact that there is no clear direction for the markets in 2012, doesn't it make more sense than ever to take the time to truly value your current portfolio, due the proper due diligence on stocks that you are inspecting for hereafter purchase, and to then stay on top of things so that you can make the approved mid stream adjustments as circumstances change? Does anything care more about your money than you do? Really? It's not that hard!
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2012 Outlook For High Yield Dividend Paying Stocks for retirement
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