For Patient Investors, Dividends May Offset A Slow-Moving Summer

The Wall Street saying “Sell in May and go away,” isn’t about getting out of the market. Rather, it’s a warning that the market’s returns in the middle few months of the year tend to slow.

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  • But even through the summer, it makes sense to stay invested. It’s only September and October that are historically challenging for investors. With a summer slowdown the seasonal norm, investors can find opportunities, particularly with dividend-paying stocks.

    While dividends haven’t gotten as much attention in the age of AI, the total payouts by corporations to their shareholders have hit a record.

    That’s thanks to increasing payouts from profitable companies. And it’s also from companies like Meta Platforms (META), which is offering a dividend for the first time.

    Meta’s starting dividend was nothing special at 0.1%, but the company is looking for a bigger payout going forward. The overall yield is still low at 0.4%. But Meta’s payout ratio is a low 3% of earnings.

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  • That means there’s more room for big dividend hikes in the next few years alone.

    Action to take: Long-term investors may like Meta here or on any drop lower, given the potential income growth in the years ahead.

    For traders, shares are trending higher over the past few weeks, but are still under their 52-week highs. The September $530 calls, last trading for about $19.00, could see mid-double-digit returns on a further trend higher.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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