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Ever notice how as time passes, things go in and out of style?
My 17-year-old daughter loves wearing jean jackets. Ray-Ban sunglasses are making a comeback. Even the fanny pack is supposedly trendy now!
As dividend investors, we often watch fads in the market come and go.
For a short time, some investors loved “cloud technology” stocks. And then they shifted focus and moved all their capital into cryptocurrency plays. It’s possible that the next hot investment idea could be artificial intelligence or self-driving car platforms.
I don’t have any problem investing in great companies that are in sync with the current popular trends. But I only want to put my hard-earned cash to work if I can be confident that the companies I invest in will give me a healthy return — with plenty of income along the way.
By taking this approach, we’ve been able to collect reliable income payments month after month while avoiding a lot of the drama and uncertainty that comes with investing in the latest fad.
Today, I’m a little bit amused to see that our tried-and-true strategy of investing in quality stocks that pay reliable dividends is becoming more “popular.” In fact, dividend stocks are showing signs of becoming the new “fad” as investors look for ways to protect their capital and grow their income.
That’s all well and good with me. This new fad (or old fad, depending on your perspective) is giving new life to some of my favorite income opportunities…
A Resurgence in Consumer Staples Stocks
After years of being some of the most overlooked stocks on Wall Street, consumer staples stocks are now showing up in headlines and even being discussed on shows like CNBC’s Fast Money. How’s that for ironic?
To refresh your memory, consumer staples companies are the “boring” businesses that provide all of the things that you need for day-to-day living.
We’re talking about things like cleaning supplies, cosmetics, personal products and basic food items.
In other words, these are the things that you buy regardless of whether the economy is doing great or in a slump. And because these companies have very steady businesses, investors haven’t been interested in owning shares.
After all, you’re not going to double your money in a year with one of these stocks. (At least, that’s the prevailing wisdom.)
With so much attention on blockchain technology, self-driving cars and media entertainment, trendy investors have moved money out of consumer staples stocks. There isn’t anything wrong with the businesses (or with the income they pay to investors). But the stocks simply haven’t been “sexy” enough to hold investors’ attention.
That’s one of the main reasons shares of consumer staples companies like one of my favorite income plays, Procter & Gamble (PG), have pulled back.
Fortunately, the steady income payments investors received from PG have more than offset the pullback in the stock price. That’s the beauty of income investing… Even with the market’s back-and-forth, shareholders still get paid real …read more
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