08/02/2011

With many energy and high tech stocks paying more and more dividends, the landscape of dividend payout percentages in S&P 500 has changed. In a recent article titled as Burned Before, Dividend Funds Diversify Beyond Same Old Sectors, author Sarah Morgan reported that many dividend stock funds have diversified their investment beyond financial sector concentration to other new sectors.

The following chart from the article shows the change:

It is interesting to see that now, consumer staple stocks (XLP) is the largest sector for dividend payout. With Energy (XLE) and technology (XLK) being very close to the second largest financial sector (XLY), investors are now more in favor of these two sectors.

This change bodes well to our long standing argument that

• technology companies, being one of the main beneficiaries of globalization, have better balance sheets and are now more shareholder friendly.
• resource (energy) companies will do well in the era of depleted natural and energy resources.

Dividend investors should also focus on dividend appreciation (rising dividend) instead of merely current dividend amounts (dividend hogs). The rising dividend approach will allow you to find more energy and technology companies. In fact, it will allow you to even consider those gold mining stocks (such as Newmont (NEM)) that have increased their dividends steadily recently. As gold price continues to rise, these stocks or ETFs (such as market vector gold mining stock GDX) might be worth a look.

See Retirement Income ETFs plan for portfolios using dividend and interest paying ETFs such as DVY, VIG, VYM.

Symbols: XLK, XLE, XLY, GDX, SPX, COMP, VIG, DVY, Dividend Investing, Retirement Investing

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07/19/2011

Large technology companies such as those in Nasdaq 100 (QQQ) (COMP) have been doing exceptionally well in the past five years. They out performed large cap growth stocks. The following table shows the performance of large growth stock ETFs:

As of 7/15/2011

07/15/2011

For information on more ETF performance, please refer to here. For various stock styles (such as large growth, mid cap, small value etc.), please refer to MyPlanIQ's stock style table.

Nasdaq 100 (QQQ) was the front runner in last 1, 3 and 5 year periods. These technology companies sidestepped the last financial crisis with pristine balance sheets and conservative growth plans, having learned a lesson from the technology bubble in 2001-2002. What is more interesting is that large U.S. technology companies have dramtically expanded their global reach and are now considered multi-national companies. In the past decade, they outsourced some of their development to emerging markets, gradually learned and developed local markets and now are in the perfect position to reap what they have sowed in these rapidly developing economies.

For example, Apple (AAPL) just released its latest quarter earnings report that stated its Chinese sales reached $3.8 billion, up almost sixfold from a year earlier. The company plans to open 30 stores in the September period, including in Hong Kong, broadening a retail chain that generated $3.5 billion in sales last quarter.

The following are the top holdings of QQQ, as of 7/18/2011

In general, U.S. large growth companies are positioned well for the economic recovery. For a retirement portfolio, proper exposure into these high quality multi-national companies can be beneficial.

Symbols: COMP, QQQQ, AAPL, ORCL, MSFT, GOOG, INTC, CSCO, AMZN, QCOM, AMGN, CMSCA, ETFs

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07/18/2011

Markets have gone through risk on and off modes several times this year. Considering the state of global and domestic economy, this is not surprising. The tug of war between solid U.S. corporation balance sheets (other than financial companies) and the weak recovery ladened with bad news (such as the recent European debts) continued.

As of 7/15/2011, we have the following readings the market valuation:

• Buffet Stock Market Indicator: The ratio of the total stock market capitalization to GNP is 93%. US stock market is Modestly Overvalued. See the Historical Chart and related description. 
• Shiller CAPE10: The ratio of Real Price to the average of last 10 year Real Earnings(CAPE10)(23.92) to its long term average (16.41) is 1.46. US stock market is 46% Overvalued. See the Historical Chart and related description.
• Hussman Peak PE: The ratio of Real Price to the average of last 10 year Peak Real Earnings(14.16) to its long term average (11.94) is 1.19. US stock market is 19% Overvalued. See the Historical Chart and related description.

Another important metric credit spread (TED Spread) that measures on BAA-rated and AAA-rated corporate bonds has been above 20 basis points or so for over 3 months now. This is still a quite low reading in a longer period but judging in the last 9 months, it is elevated. When credit spread is high, it signals investors' concern on risk. See the Historical Chart.

Based on the latest weekly commentary by John Hussman, current stock valuations imply expected 10-year S&P 500 total returns of about 3.8% annually.

To summarize, markets are over valued. The tug of war is leaning more toward downside than upside. For retirement investing portfolios, it is a good time to balance back to target allocations that you are comfortable with and adopt a systematic approach.

Symbols: SPY, DJI, AGG, SPX, DJI, COMP, Economic Indicators

Exchange Tickers: (AGG), (SPY)

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07/18/2011

Markets have gone through risk on and off modes several times this year. Considering the state of global and domestic economy, this is not surprising. The tug of war between solid U.S. corporation balance sheets (other than financial companies) and the weak recovery ladened with bad news (such as the recent European debts) continued.

As of 7/15/2011, we have the following readings the market valuation:

• Buffet Stock Market Indicator: The ratio of the total stock market capitalization to GNP is 93%. US stock market is Modestly Overvalued. See the Historical Chart and related description. 
• Shiller CAPE10: The ratio of Real Price to the average of last 10 year Real Earnings(CAPE10)(23.92) to its long term average (16.41) is 1.46. US stock market is 46% Overvalued. See the Historical Chart and related description.
• Hussman Peak PE: The ratio of Real Price to the average of last 10 year Peak Real Earnings(14.16) to its long term average (11.94) is 1.19. US stock market is 19% Overvalued. See the Historical Chart and related description.

Another important metric credit spread (TED Spread) that measures on BAA-rated and AAA-rated corporate bonds has been above 20 basis points or so for over 3 months now. This is still a quite low reading in a longer period but judging in the last 9 months, it is elevated. When credit spread is high, it signals investors' concern on risk. See the Historical Chart.

Based on the latest weekly commentary by John Hussman, current stock valuations imply expected 10-year S&P 500 total returns of about 3.8% annually.

To summarize, markets are over valued. The tug of war is leaning more toward downside than upside. For retirement investing portfolios, it is a good time to balance back to target allocations that you are comfortable with and adopt a systematic approach.

Symbols: SPY, DJI, AGG, SPX, DJI, COMP, Economic Indicators

Exchange Tickers: (AGG), (SPY)

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