In Rough Markets, Put Safe Dividend Payers First

The market has dropped over 5 percent in just the past few weeks. Bond yields have soared, which have made bonds more attractive compared to dividend-paying stocks in general. But while bond yields fluctuate over time, the price paid out doesn’t change.

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  • For dividend stocks, being able to grow the payout over time tends to lead to great returns. That’s because higher payouts tend to lead to higher share prices.

    RPM International (RPM) isn’t a household name. It’s a specialty chemical manufacturer. That’s a steady business, in good years and bad for the market and economy. Now, the stock is about to raise its dividend for the 50th consecutive year.

    RPM has grown revenues by 4 percent in the past year, and earnings are up 19 percent. While the current yield of 1.8 percent isn’t very high, rising dividend payouts and rising share prices keep the yield down.

    Long-term holders get an increasing payout and a higher share price over time.

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  • Action to take: Long-term investors may like shares here as a dividend growth holding, and to accumulate more shares on any drop lower. RPM is about 10 percent off of its 52-week highs.

    For traders, shares have started moving higher in recent sessions. The November $100 calls, last going for about $2.50, could see mid-to-high double-digit returns in the coming weeks.


    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 of the companies mentioned in this article.

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