September 13th Daily Market Note: Monthly Long-Term Investing Edition (U.S. Dividend Stocks Strat)
Premium Daily Note: 9/13
Note: I just want to thank our Community again for the amazing support of my research. On top of Options Strategies that I share with folks, I will also share a Monthly post on Investing related to Dividend Stock opportunities for the investors in my readership. This note focuses on U.S Dividend Stocks. In future notes, I’ll also include HK-listed dividend opportunities.
I will be out of office starting tomorrow 9/14 to October 1st. My Daily Market Note will resume on October 2nd. Options Bootcamp will be announced in early October.
Yesterday’s Sector Rotation note is already working nicely. Please share my work with your network as your voice is extremely important!
Daily Market Note: September 13th 2023 by Larry Cheung, CFA
September Long-Term Investing Edition (U.S. Dividend Stocks Strat)
Forward-looking Conclusions of this note:
Macro: Never judge CPI Day by its initial action, as the real move always comes days after. This is an environment where taking a longer-term view will be highly beneficial for portfolio positioning as stocks remain in a choppy zone.
Stock-Specific: This note will be focused on U.S. Dividend Stock Opportunities and I will comment on longer-term investment ideas at least once per week in my Daily Market Notes.
Bonds: Bond Yields stay high after Inflation CPI outcomes as a higher for longer monetary policy continues to be in place.
China: China ADRs begin to consolidate for its next steps on policy related to stimulus, and government support for consumer spending. Many names have been close to arriving at my Targets.
Daily Market Note & Context
On top of the Trading setups that I will identify for Members with Selling Puts or other Options opportunities, I am also dedicating at least one Daily Market Note per week to focus on Investing. This is because I know that a significant portion of my Community readership base is comprised of longer-term investors. For this reason, I will do my best to help Traders AND Investors succeed within my Community. This note will be focused on U.S. Dividend Stocks that I am watching in this current environment. In future notes, I will also discuss Hong Kong Dividend Stocks for my Asia-Pacific readers.
Let’s start by understanding the context. The current dividend yield on the S&P 500 (SPY ETF) is about 1.5%. Many of the stocks within the S&P 500 that pay out dividends tend to pay them out in the 2-4% region per year. The biggest competitor to dividend stocks – in my opinion – is the risk free treasury 10Y yield which is at 4.3%.
To make dividend stocks attractive, they also need to have some type of capital appreciation potential. That means if a dividend stock yields about 2-4%, and has capital appreciation potential of 5-7%, then that opportunity is definitely stronger than the 10Y yield. For the purposes of this note, I will list out a number of companies that I believe offer dividend yields that are appropriate for today’s environment while also sharing capital appreciation opportunities. Naturally, to take advantage of the dividend, one would need to hold the stock at least to the ex-dividend date so that they get paid with the dividend on a per share basis. To take advantage of the annual dividend yield, one would need to hold for the whole year.
List of Best Ideas in U.S. Dividend Stocks by Sector – as of September. I will provide an update to Dividend Stocks on a monthly basis. Dividend investors want to choose companies that have a very low probability of seeing its dividend being cut or reduced. Generally speaking, for members, I’m targeting a dividend yield of 2% or higher. Anything less than that, and I don’t really consider the dividend meaningful for passive income.
I will focus the list of names on companies that I personally have transacted in (know well), and will avoid sectors/names that I’m unfamiliar with. I will comment on companies from Financials (F), Health Care (H), Energy (E), and Consumer Staples (C). I will avoid Materials, Utiltilies, REITs, and Industrials. Those sectors, I don’t have a proven track record in making money in, but F/H/E/C, I’m comfortable with and have consistently made profits from in the past. I must stick to what I know.