Wall Street

Copyright 2006 Rafael Velez

Online Stock Market Trading 2006 is another strong year for dividends. For the third year in a row, a growing number of companies have either increased their dividends or begun paying dividends. In addition, more investors are paying attention to the solid companies that are capable of paying dividends. That is a big change from the late-1990s, when investors by and large shunned yields and many companies refrained from paying them, so that stock market yields in the U.S. plunged to unprecedented lows. History shows, though, that over longer periods of time dividends have always been an essential component of total return, regardless of which direction the market has headed. Between 1926 and 2004, dividends accounted for roughly 40% of the average annual return of the U.S. stock market.

—Liz Claman, Cohost, CNBC Morning Call "For those accustomed to America's economic dominance, up call. But Peter Schiff is one Cassandra whose voice deserves your rapt attention. Devoid of the usual Wall Street spin, this frank and prophetic read will make you reconsider the very foundations on which your financial house is built." —Jonathan Hoenig, Portfolio Manager, Capitalistpig Hedge Fund LLC and FOX News Channel analyst

Stock Investing Course Another impetus for the dividend resurgence, of course, has been the Jobs & Growth Tax Relief Reconciliation Act of 2003, which lowered the maximum tax rate on long-term capital gains and qualified dividends to 15%. With a more level playing field between the taxation of capital gains and dividends, companies can more clearly decide what allocation of capital is best for shareholders over the long-term rather than what is more tax-efficient.

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Stock Market Game There are relatively few individual securities that provide a high current yield and grow their dividends, so the challenge for portfolio managers is to build a portfolio of companies that, as a whole, meet both criteria. That requires in-depth, company-by-company, and increasingly, global research. The search often begins on familiar terrain. Electric utilities, oil and gas companies, real estate investment trusts and banks are classic examples of sectors that have traditionally paid generous dividends and increased them in order to make their stocks appealing to investors.

It seems like every week Wall Street comes up with some new, exotic investment idea that puts your money at risk. Thankfully, traded funds (ETFs) are less volatile than individual stocks, cheaper than most mutual funds, and subject to minimal taxation. But how do you use this wonderful product to diversify your investments in today’ changing market

Stock Investing Game Our firm continues to recommended equity income funds to clients as core holdings in a diversified portfolio, as a part of their college savings plan or to produce reliable quarterly income in retirement. While these holdings have delivered above average returns for years, it is important to remember that it is not the objective of the funds to beat a stock market index such as the S&P 500. (The S&P 500 consists of 500 stocks representing major US industry sectors.)

fund manager and longtime Wall Street commentator Jim Cramer explains how to invest wisely in chaotic times, - or should be, when it's done right.

Journal Prime Rate Street Wall It is the objective of the funds to provide an attractive long-term return by pursuing a conservative strategy focused on providing above-average current income and growth of dividends over the years. Although the majority of assets have typically been held in U.S. based companies, the funds have the flexibility to invest anywhere in the world. In the past, the U.S. stocks provided some of the most reliable dividend income in the world. Now, the U.S. is a relatively paltry source of dividend income, and superior yields and dividend growth come from companies based in Europe and Asia. Many of these equity income funds feature low expenses, experienced managers, limited volatility and steady long-term performance.

Stock Market News (Review the prospectus before investing. Past performance is no indication of future results.)

Stock Investing Basics Source: Triump of the Optimists, 101 Years of Global Investment Returns, Dimson-Marsh-Staunton

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Stock Market Trading Rafael O. Velez III is the Managing Director and Registered Principal of Summit Financial Advisors, LLC, based in San Mateo, California. Additional resources and ideas are offered on their Web site, http://www.summit-advisors.com . Please e-mail comments about this article to rafael@summit-advisors.com.

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