There are no points for original ideas in investing. It only matters if your ideas are any good or not. The proof of that shows in your returns.
It isnt any secret backed by many academic studies that dividend stocks outperform the market over the long term. When stock prices fail to reward as they have done this year, with the FTSE 100 declining 2% dividends give investors a regular income stream and, most importantly, a reason to stay invested.
Day to day the market has a 50% chance of moving up or down, but a smart investor with a time horizon of 20 years or more will at worst see low single-digit upside on a diversified share portfolio.
All the more reason to hug your income shares.
Were in a fierce bear market for the UKs supermarkets. Morrisons (LSE: MRW) (NASDAQOTH: MRWSY.US), the number four contender, has lost 35% of its value in 2014. In August shares of the iconic retailer sunk to a five-year low. Theres nothing to suggest the shares wont get cheaper, with a skittish market stampeding for the exits after each new trading statement.
Should we generally pay any attention to markets? Im interested in buying great companies, and dont especially care what anybody else is doing except in one instance. Theres money to be made when a great company trades below its fair value, so my attention is piqued when I believe investors may be panicking.
The problem is that its not just investors who have hit the panic button. Morrisons management initiated a price war, but sales have yet to pick up. Like-for-like turnover fell 5% in the half year. Were lowering prices in a very difficult market. Its going to take time, the firm said.
It isnt that Morrisons needs to compete directly on price with the likes of Aldi and Lidl. The offering at Morrisons is far superior, with more choice and an emphasis on fresh produce. It comes down to striking a balance between sales and profitability, and Morrisons has yet to find the right price level.
The economy showed some encouraging green shoots in 2013, with nearly half of consumers saying they felt positive about their finances. However, theres a significant economic divide between the south of the UK and the north the latter being Morrisons homeland.
Will consumers return to Morrisons stores when economic growth spreads north? The Warren Buffett quote, If you wait for the robins, spring will be over resonates here.
Although the +7% dividend yield may raise alarm bells, the business remains highly cash generative, and there should be sufficient cover. But this isnt an investment without considerable risk, which means theres potential for a higher payoff for turnaround investors.
I’m yet to decide whether Morrisons is worth a punt. Meanwhile,an attractive small cap opportunity has caught my eye. The Motley Fool’s lead smaller companies analyst has discovereda 250m hidden gem which could double profits within the next four years.