Dividend Paying Stocks

Dividend paying stocks are those stocks that increase their dividends while you hold them. You can increase your yield due to a higher payout which will typically drive the price of the share higher. On the other hand, a dividend drop is not good. The best way to find dividend stocks is to use programs specifically designed to search the entire market for stocks that meet your determined criteria. This investing strategy is referred to as “screening.” Dividends are defined as cash payouts given to stockholders of a company and are a great way for companies to reward their stockholders for investing in their company. Dividend paying stocks are also a great way to distribute profits made by a company.

Dividend paying stocks are great for many reasons. They save on taxes in that qualified dividends are taxed at lower long-term capital gain rates, and they also accumulate over time. Dividend paying stocks also will rise over a period of time. As long as companies raise their dividends over time as well to keep up with inflation, the value of your interest over time will not be negatively affected. Some investors will argue that companies who produce dividend paying stocks are less likely to destroy shareholder value through stock option abuse. The abuse of stock options has been a problem and dividends are not attuned to stock options. In fact, dividend payments reduce the stock prices appreciations thus transferring the value to current holders of stock and not to those investors who have an option to buy stock.

Dividend payers require at least a 10% return on equity from dividend paying stocks and also practice the belief that passing stocks has to have been reasonably profitable for at least 5 years prior before they invest. This is due to the fact that many companies producing high dividend paying stocks only recently went public. These companies have not been in business long enough to establish a reliable track record of producing dividend paying stocks in the stock market. On that note, bigger companies are less volatile and are safer than your smaller firms who have a smaller market capitalization. Reducing risk is a vital part of dividend investing and small caps are by far the riskiest. (Small cap stocks are those stocks with a market cap below one billion)

Dividend paying stocks also tend to fall less during bear markets. They do this for various reasons, one being that dividend paying stocks generate current income. Dividend paying stocks are consistent and bear markets take place normally during trying times such as recessions when people may find themselves earning less, or even unemployed. The quality of earnings is also higher with dividend paying stocks because shareholders receive their earnings in the mail in an actual physical envelope with an actual physical check. No cooking of the books on the mind and even better, real, hard cash. Dividend paying stocks also become yield supported in that the dividend yield increases as the earnings per share price decreases.

Dividend paying stocks are great for investors who have a hard time handling volatility when investing in stock. Stocks are of course a riskier investment than most, but dividend paying stocks appear to display consistency (as opposed to other ventures) due to the fact that dividend paying stocks typically fall less.

Market Direction: What is the biggest bugaboo for most investors? Their own emotions! Have you ever sold a stock at the absolute bottom because you could not stand the pain anymore? Have you ever held onto a stock too long after having good profits because you were worried the price could go higher? We all have done that. The proverbial fear and greed is what keeps most investors from making profits in the markets. Fortunately candlestick analysis eliminates emotions of the investing.

The basis of candlestick signals is the hundreds of years of profitable utilization by Japanese Rice traders. Emotions can be eliminated when investing based upon one simple assumption. The information conveyed by candlestick signals work extremely efficiently, otherwise the signals would not be in use today. Two major advantages are produced by candlestick signals. They are visually easy to recognize. Candlestick charts, which are now found on all computer systems today, convey an immense amount of information. Along with the easy visual identification, each signal incorporates valuable investor sentiment. Having the ability to witness where investor sentiment may be changing in a trend is a powerful investment tool. An investor's profitability is even more enhanced by understanding the nature of the investor sentiment that created the reversal signals. If you can see when a potential trend change is occurring, AND you understand why that trend change is occurring, you will then grasp the thought processes of professional investors.

Why is it so hard to buy at the bottom? Every investor wants to be able to buy low and sell high. Although that may seem to be an understatement, reality is that most investors have a hard time overcoming the fear that is associated with stock prices or commodity prices trading at the end of a downtrend. Candlestick signals create visual opportunities for investors to buy without fear when the trend is reversing at the bottom.

The fear of taking profits also reduces many investors' returns. What is the biggest fear when taking profits? The fear of looking stupid! How stupid we would feel if we sold stock with good profits and it continued to move much higher after we sold it. Nobody wants to look foolish. Candlestick signals relieve that emotional drawback. Candlestick signals produce high probability reversal signals. Recognizing a candlestick "sell" signal in overbought conditions creates the opportunity to take profits knowing that the probabilities are in your favor.

Utilizing obvious support and resistance levels, such as the major moving averages, a candlestick investor is given a trading roadmap that makes taking profits much easier to implement. Using a few simple rules produces easy price target projections. In the example of James River Coal Company, the Bullish Engulfing signal, in the oversold conditions, told us it was time to buy. What was the first potential target? The 50-day moving average! Notice there was not a candlestick sell signal when the price got to the 50-day moving average. What can we infer from the dark candles at the 50-day moving average? That was obviously where somebody was taking profits but not reversing the trend. Once it broke through the 50-day moving average, what becomes the next logical target? The 200-day moving average! Being able to project the next target provides the candlestick investor with a huge advantage. The gap up in the overbought condition, taking prices up through the 200-day moving average, created the alert to watch for a candlestick sell signal. The Dark Cloud signal formed by opening above the previous days trading and closing more than half way down the previous bullish candle produced clear and concise information on what was going on in investor sentiment.

JRCC

Taking profits when candlestick sell signals appear at logical resistance levels can be done without the fear of coming out of a position too early. Take advantage of the 12 major signals in candlestick analysis. Learning these signals is all that is needed for evaluating the major reversals in price trends. Click here for the Candlestick Forum's 12 Major Signals training CD special.

Candlestick signals show when to buy and show when to sell. Use the information that has worked for centuries. To ignore what the signals are revealing means you will be operating with the probabilities against you. We all "hope" for prices to do what we want. Unfortunately, the markets do not care what you "hope" for. Candlestick signals reveal what the markets are actually doing.

SNIC

Market direction - It is not unusual to see the whipsaw action in the markets after a Fed announcement. Yesterday, all the reasons for being bullish were being expressed. Today all the reasons for being bearish were being expressed. The same type of selling day occurred two weeks ago, a big down day in the Dow closing right near the 50-day moving average. However, the 50-day moving average appeared to act as support two weeks ago. It will be important to see what type of trading occurs early tomorrow. Further selling could make the 200-day moving average the next target.

DOW

Trying to predict a day like today is impossible. The benefit from candlestick signals is being able to evaluate what investor sentiment is doing after a day like today. Was the selling a knee-jerk reaction? Was today's selling the beginning of a strong downtrend? That will be better answered by the type of signals that may or may not form over the next day or two. Candlestick analysis benefits each investor by indicating what the probabilities are for a direction of a trend based upon individual candlestick signals. This information was what revealed the selling had stopped after the last large selling day of two weeks ago. The Hammer signal. We will use that same knowledge to evaluate what the markets will do from this level.

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Good investing,

The Candlestick Forum Team

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