Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Published: March 17, 2005
Is the economy growing or slowing? Amid the uncertainty, income
stocks are outperforming the broader market.
Slow growth, strong growth. Low inflation, high inflation. Measured
interest rate increases, aggressive interest rate increases. With
shifting expectations regarding these three key economic fronts, stocks
swung wildly during the first two weeks of May.
Is the economy growing or slowing? On one hand, we're seeing high energy
prices eroding consumer and business spending and dimming the outlook
for corporate profit growth. Wal-Mart (WMT), for example, recently
reported weak April sales and lowered its earnings guidance for the
current quarter, stating that higher fuel costs are crimping consumer
spending. Along the same lines, the University of Michigan reported that
consumer sentiment has now dropped for five straight months, falling in
April to its lowest level in two years.
Yet, we're also seeing the tell-tale inflationary signs of robust
economic growth. The latest non-farm payrolls report showed that the
economy generated 100,000 more jobs than expected in April. Furthermore,
retail sales grew +1.4% last month -- the strongest reading in six
months. Meanwhile, the consumer price index (CPI), a key inflation
gauge, rose +2.2% during the first quarter, the fastest pace in over
three years.
Even the Federal Reserve seems uncertain about the direction of the
economy. On May 3rd, the Fed raised its benchmark interest rate a
quarter-point in a continuing effort to nip inflation in the bud. Nearly
two hours later, though, it posted a revised statement acknowledging
"the solid pace of spending growth has slowed somewhat."
What does all this have to do with income investing? A great deal,
actually, considering that prices of high-yielding income stocks -- such
as real estate investment trusts (REITs)-- typically move inversely to
interest rates.
Income-oriented investors are often forced to choose between high-yield
stocks or low-risk fixed income alternatives pegged to short-term
interest rates, such as treasury bills. When investors believe the
economy is slowing and interest rates are likely to level off,
dividend-paying stocks may look more attractive than their fixed-income
counterparts. On the other hand, when the economy is speeding up and
investors anticipate that future rate hikes will be needed to reign in
inflationary pressures, yields on low-risk investments are likely to
rise, thereby making income stocks less appealing by comparison.
Lately, dividend-paying stocks have reaped the benefit of mixed economic
news. The broad-based S&P 500 Index (GSPC, 1154.1) has lost nearly
-5% year-to-date. Over the same time span, the Dow Jones Select Dividend
Index (DJJ, 702.5), a group of 100 solid dividend-paying stocks, has
shed just -2.5% -- half as much as the S&P. Better yet, major real
estate investment trusts, as measured by the Morgan Stanley REIT Index
(RMS, 757.6), have lost just -1.6% for the year. Despite much
volatility, all three indices remain largely unchanged so far for this
month, losing about -3 points each.
With an uncertain economic outlook, investors are holding on to
their dividend-paying stocks. Thus far in 2005, dividend stock indexes
(RMS, DJJ) are outperforming the broader market (GSPC).
Outlook
Stocks in the S&P 500 Index are now expected to post a modest +2.7%
gain over last year.
Despite the economy sending mixed messages, corporate earnings are still
growing at a healthy pace. By now, most S&P 500 companies have
released first-quarter earnings reports, and almost half have topped
analyst expectations. Early tallies show that on average, earnings grew
about +12% over a year ago, extending an impressive string of
double-digit quarterly gains that began three years ago.
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Investors may be able to profit from the disconnect between earnings
growth and share prices. Many analysts are forecasting second-quarter
and full-year earnings growth of about +7%, but the S&P itself is
now expected to eke out just a tepid +2.7% gain for the year, down from
an earlier +7% target. Assuming these projections pan out, the good news
is that the Price/Earnings multiples for many S&P companies should
contract. This could set the stage for solid gains in 2006.
Important
Note: The above article was merely a small excerpt from a
recent News Flash we sent to subscribers of our premium, income-oriented
investing newsletter -- High-Yield Investing. In each
issue of that newsletter, editor Carla Pasternak delivers a host of
other investing ideas and tips designed to help you earn steady gains
and above-average income from your portfolio. To receive your copy of
our most recent High-Yield Investing newsletter, as well
as other guidance similar to this every month, you'll need to register
for this separate publication. Please visit one of the following links
to continue...
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Please Note: The above article was merely a
small excerpt from an issue of our premium income newsletter -- High-Yield
Investing. In each issue Carla Pasternak presents
a wealth of information and timely investment ideas to help you earn a
steady income stream from your investments. To receive a
complimentary three-week trial or to learn more about our High-Yield
Investing service, please visit the following link: http://www.StreetAuthority.com/subscribe.asp#hy |
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