Note from Daily Trade Alert: Below you’ll find the latest installment in a series of articles from a young man who calls himself “Dividend Mantra.” This series — commissioned by DTA — aims to show our readers exactly how this 30-year old (with a $50k salary) plans to retire in just 10 short years from now. As a reminder, unlike the majority of analysts we cover here at Daily Trade Alert, “Dividend Mantra” is NOT a professional (and he doesn’t claim to be). Nevertheless, we’re fascinated by his story and we’re confident our readers will benefit from his approach to generating a lifetime of steadily rising income…
Most people would call it blasphemy, but I’m secretly hoping for a market crash.
Of course I’m not hoping for a serious economic calamity, higher unemployment or mass chaos in the streets.
But to be perfectly honest I wouldn’t mind a major crash.
In short, a broad, large pullback in the stock market would provide a long-term investor like myself incredibly attractive entry points into high quality businesses.
It’s happened before.
Consider the buying opportunity we had with Coca-Cola (KO) during the last crash…
At its bottom in March of 2009 we could have bought this worldwide beverage leader for a split-adjusted price of just $18.72 per share.
Today, considering its current quarterly dividend payout of $0.255 per share, we’d have a yield-on-cost of 5.4%!
Take a look…
Not only is that nearly triple the yield of a 10-year treasury right now, but it’s a yield that will only rise over time if Coca-Cola continues raising dividends like clockwork.
As an added bonus, we would have seen strong capital appreciation too. Including dividends, Coca-Cola has returned around 119% since the crash.
Chevron Corporation (CVX) is another good example of a high quality company that offered us an incredibly buying opportunity during the last market crash.
On March 5, 2009, when the stock hit bottom, this energy juggernaut traded hands for as low as $56.12 per share.
At a current quarterly dividend of $0.90, we’d now be receiving a yield of 6.4% on our purchase price!
It gets even better when you consider the fact that we could have doubled our money too, as Chevron currently trades for around $110.
Can you see the opportunity here? Not only could the next crash let us lock in abnormally high yields from world class businesses, but we could set ourselves up for significant capital appreciation too.
Bottom Line: If the market crashes, I’ll be ready. Not only would I buy Coca-Cola (KO) and Chevron (CVX), but I’d also load up on other high quality dividend growth stocks like Johnson & Johnson (JNJ), Procter & Gamble (PG), PepsiCo (PEP), Philip Morris International (PM) and Kinder Morgan Inc. (KMI).
Thanks for reading.
– Dividend Mantra
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Full Disclosure: Long all aforementioned equities.
