It’s almost the “Holy Grail” of investing… an asset group that beats the market with less risk.
Just after the “mini crash” in August, I shared an incredible list of assets with you. They were the assets that “survived” the market’s 17% loss from July 22 through August 8. I encouraged you to think of them as beach houses that held steady during a hurricane… while most of the neighborhood was devastated.[ad#Google Adsense 336×280-IA]This list contained several of the world’s best businesses… companies that make “the basics” and pay the most reliable dividends. Coca-Cola was on the list. Cigarette powerhouse Altria was on the list. Colgate-Palmolive and Kraft were on there as well.
While the world panicked, these companies held steady and kept raking in reliable cash flows. It’s still a trend you can participate in today and collect a lot of income from. And as I’ll show, it’s a way to beat the market with much less risk…
Despite recession worries, the plunging broad market, and the European debt crisis, our “survivors” group has climbed since we last checked in with them. Take a look:
During this period, the S&P 500 is down 4% (with dividends). Including its latest dividend payment, our “worst” performer, Pepsico, is only down 2.7%. And overall, we’re up 2.8%.
On average, these companies yield 3.3%. And in the past five years, they’ve raised their dividends an average 42%. Since mid-August, we’ve collected four dividend payments… and we expect more and growing dividends down the road.
Even better, these stocks are less risky – less “volatile” – than the market as a whole. Volatility is a measure of how much stocks “wiggle around.” High volatility means share prices are lurching every which way. Low volatility means the share price doesn’t change much from day to day.
Here’s how our “survivors” measure up:
As you can see, the market has been almost twice as volatile as our group of stocks. In short, they’re a “sleep well at night” alternative to owning an index fund or “economically sensitive” assets like commodities, airline stocks, steel producers, and homebuilders.
Sure, measuring an asset’s return over just a few months only gives you a snapshot of how it can perform. But the past few months have destroyed most investors… in a highly volatile fashion. Investors who focused on elite, shareholder-friendly companies have done just fine.
The past few months have simply driven home the point Dan Ferris made a few weeks ago:
Considering that these world-champion, dividend-paying companies are available to investors, I can’t understand why anyone would shortchange themselves by owning lots of volatile, deeply indebted, barely-profitable businesses. It’s like choosing SPAM over filet mignon.
And like I said, these elite cash payers are close to the Holy Grail for investors: They’re offering higher returns with less risk. If you’re considering buying stocks for the long-term, these should be at the top of your list.
— Brett Eversole[ad#jack p.s.]
Source: Daily Wealth