| A great many investors including those in or near | | | | others, the high yield is due to a perceived risk |
| to retirement were burned by the bubble, and | | | | that may not actually be there. In the case of |
| then again by the crash resultant from the | | | | Business Development Companies, Master Limited |
| sub-prime mortgage crisis. Many took what was | | | | Partnerships, and Real Estate Investment Trusts, |
| left of their portfolios and squirreled the balance | | | | a high yield may, at least partially, be a result of |
| away in safe havens such as CD's, treasury bills, | | | | the tax free status of these organizations. |
| and cash. In so doing they "protected" the | | | | Additionally, frequently all like equities drop in |
| remains of their investment principal, but as a | | | | concert with a similar stock that has announced |
| result, they missed the spectacular broad based | | | | some sort of serious problem, only to pop back |
| market rebound that began in the spring of 2009 | | | | up again when it is determined that it is only the |
| and ran through the balance of the year. By being | | | | one stock that is in trouble. |
| "scared out of the market" they did precisely | | | | For example, when one REIT announces a large |
| what is the bane of any portfolio. They sold out | | | | loss, the whole sector suffers. When one oil |
| at the bottom. | | | | refinery has a fire, all refinery stocks are |
| OK, so the market had a spectacular last three | | | | impacted. A savvy investor watches for these |
| quarters in 2009. Will this continue as we proceed | | | | "gifts" that the market offers. An irrational drop in |
| through 2010? Or is the sell-off that we saw last | | | | a sound company offers a special opportunity |
| week the beginning of another down turn? No | | | | when that company is a high yield dividend payer. |
| one knows. We do know that inflation is in check. | | | | As the stock price of a dividend paying equity |
| We can be relatively certain that low interest | | | | goes down, the yield goes up. By watching a |
| rates will remain in place until employment | | | | group of high yield dividend paying stocks |
| improves. It also appears that quarterly profits will | | | | carefully, and knowing the fundamentals of each, |
| generally exceed last year's, and it looks like GDP | | | | it is not rocket science to see when an |
| (Gross Domestic Product) will grow in the area of | | | | opportunity presents itself. Plus high quality |
| 2.5 to 3% as opposed to shrinking during the | | | | dividend paying stocks offer a second cushion |
| recession. These are all indicators that should be | | | | during downturns since they continue to pay |
| positive for the market. On the other hand, no | | | | dividends despite fluctuations in price. |
| one knows when inflation will start to rear its ugly | | | | Proper due diligence (doing one's homework) does |
| head, and with geopolitical tensions high, terrorist | | | | take time and effort, but is ALWAYS worthwhile |
| threats lurking in the shadows, global warming and | | | | for the serious investor. Anyone looking to |
| health care still question marks, there is plenty of | | | | maintain and/or build a significant dividend stream |
| reason for the bears to believe that another | | | | for their retirement should take the time |
| down turn looms ahead. So, while it appears that | | | | necessary to know and understand the universe |
| a perhaps less robust continuation of the rebound | | | | of stocks that they are focused on. Being sure |
| is likely, no one has the proverbial crystal ball. So | | | | that the stocks that you invest in meet your |
| the question remains, what to do in these unsure | | | | investment criteria and fall within your tolerance |
| and unpredictable times? If an investor has | | | | for risk is very important both for your peace of |
| money sitting on the sidelines is it best to leave it | | | | mind, and greatly improves the likelihood of |
| there recognizing the risk of not keeping up with | | | | meeting your investment objectives. If you are |
| potentially rising inflation, but protecting it from a | | | | already in retirement, placing a segment of your |
| possible decline in the markets? | | | | portfolio in high yield stocks will greatly enhance |
| Investing in a diversified portfolio including growth | | | | your income. If you are younger and building a |
| stocks, bonds, international equities, and income | | | | portfolio for retirement, considering the inclusion |
| producing stocks, etc. provides somewhat of a | | | | of high yield dividend stocks, in a long term dollar |
| cushion based on the theory that while some | | | | cost averaging program, is very prudent. You will |
| sectors will be down, others will be up. This is | | | | not only be buying more shares when the price |
| often the case, and I am a firm believer in | | | | of the stock is down, but your purchasing power |
| diversification with a structure based on each | | | | will be enhanced by the dividends that you will be |
| individual investor's age, tolerance for risk, and | | | | able to reinvest. |
| investment style. Where I deviate from the norm | | | | Being proactive in rebuilding your portfolio can be |
| is the inclusion of high yield, dividend paying, | | | | very rewarding. While there is risk involved, is it |
| income bolstering, equities as a significant segment | | | | really more risky than staying out of the market |
| of my portfolio. Most brokers and investment | | | | and missing the moves up, missing potential capital |
| advisors are wary of investments that yield over | | | | gains, and, in the case of high yield dividend |
| 6%, and run from any investment yielding 10+%. | | | | equities, missing the opportunity to earn very high |
| The logic being that any equity paying at these | | | | dividend yields regardless of whether the overall |
| lofty levels is doing so due to the high risk | | | | market goes up or down? |
| involved. In some cases this is absolutely true. In | | | | |