Many of you are likely shocked by the sharp decline (about 7%) in equity values since the first of the year. Instead of a mass retreat however savvy investors resist panicking and buy newly discounted stocks and not sell.
Rather than investing in mutual funds, I prefer a diversified portfolio of individual stocks as you can decide when to buy and sell each company and you only pay fees once instead of a fund that charges you annually.
But I don’t buy just any stock, I prefer high-quality, dividend paying stocks. If you hold for the long term, they are generating a nice income stream taking the sting out of inevitable fluctuations in price over time. I focus on companies that are leaders in their fields with a long track record of profits that not only pay dividends but have a history of increasing them over time. Another nice benefit of dividends compared to interest income is that they are taxed at a lower rate (up to 19.6% lower for high-income taxpayers).
Below is a list of 13 stocks I own that meet my criteria of steady profits, leaders in their field, have a track record of increasing dividends, and a price to earnings ratio based on forward projections of around 20 or less. There is an absence of oil stocks despite their huge current dividend yields as I am concerned many will cut their dividends as profits disappear with the current low oil prices.
With any investment decision I encourage you to discuss this with your investment advisor and CPA to see if this is suitable for you.
Happy investing and remember – hold for the long-term!
Ray Link is a CPA and holds an MBA from the Wharton School. He recently retired from FEI Company (NASDAQ: FEIC) where he was the CFO for 10 years. He is on the on the Board of Directors of Cascade Microtech (NASDAQ: CSCD), Electro Scientific Industries (NASDAQ: ESIO) and nLight Photonics.