And for those of you who follow me on Twitter (@annekatessmith) you'll see that I, too, am a huge Washington Nationals fan. Even caught a foul ball last year!
But we digress - back to dividends. The important thing I think this year is to not chase the highest-yielding stocks, often int he telecom and utilities industries. You'll get better value with the dividend growers. Stocks that have plenty of room to increase that payout. Stocks worth looking at include Amgen, the medical products company and Kohl's, the retailer.. Look for a low payout ratio--that measures the percentage of earnings paid out in dividends.
To KMM, I'm reluctant to offer stock tips beyond what appears in the magazine. Our January issue has our picks for the year, as well as picks by columnists Andy Feinberg and Jim Glassman. And our Feb issue has a great story called "Hate 'em, Love 'em." It's about companies that people hate but that make good investments. Personally, I continue to hold Apple (still with a gain but a lot less of a gain than a few months ago) and Microsoft, dirt cheap but with issues (mainly is the PC business history?) And just a heads-up, our March issue will contain a story on Tomorrow's Blue Chips. It's about 6 midcap stocks that we think have the potential to grow into behemoths. Sorry, but I can't spill the beans about the specific stocks yet
Thanks, Anne. A lot of useful tips there.
I'll post all of those articles Manny referenced in just a minute.
In the mean time, are you ready for our next question?
My guess is that EM stocks will beat stocks from developing markets. But these things are still volatile so proceed gingerly. As a rule, I think most people should have part of their international exposure in a diversified emerging markets stock fund. The fund we use in the Kiplinger 25 is the T. Rowe Price EM fund. The Kip 25 also includes Matthews Asia Dividend, which is part in EMs and part in developed Asia
The whole Kip 25 had an amazing 2012
Emerging markets should provide good opportunity this year. We think China should see 8% GDP growth this year, for instance, 6% in India and 4% in Brazil. Other good bets are companies that sell to consumers in those markets, focusing on wants, not needs--that's what's driving these markets. A couple of examples noted by my colleague Elizabeth Ody, in her outlook for international stocks in our January issue, include luxury retailer Burberry and German automaker BMW.
Interestingly, on the international front, some market-watchers think Japan could be the dark-horse market this year.
Is that partly cause Japan is letting Japan depreciate? Those of you who have been investing for a while may recall that the Nikkei was almost 40,000 in 1989. Now, almost a quarter of a century later, it's some 75% below the peak. Unbelievable
Anne, I meant is it cause Japan is letting the yen depreciate?
Yeah, the Japan market has been flat for 30 years--so it is indeed, a dark horse. But one respected fund manager, Rob Taylor of Oakmark International, told Elizabeth in our January issue that he likes what he's seeing in terms of how Japanese companies are deploying cash via dividend hikes and share buybacks--which should figure prominently in the U.S. market, too.
We have a comment from Sarge.
Whether or not Japan is the place to be, most investors are better served by keeping it simple, a topic that was the subject of our Nov cover story. And when it comes to int'l investing, the simplest strategy is to just buy a diversified foreign stock fund. If it has exposure to EMs, you're probably covered. If it doesn't, then add a diversified EM fund in the amount you're comfortable with. Gosh, it's hard to believe now that Sony once ruled the world of consumer electronics. Anyone still use a Walkman?
Manny, it's even harder to believe that iPods are on their way out!
Or standalone ipods, that is
Sarge, Steve doesn't like any of the actively managed emerging markets funds. Truth be told, the Price fund has not exactly been a barn-burner, though it did beat its benchmark in 2012. The EM fund in our 401K plan is from DFA. But its funds are not sold directly to individuals. You have to work with an adviser or, if you're lucky, have the DFA fund in your 401K
Sarge, that ETF holds some of the international community's biggest companies, such as Nestle, Novartis, BP and Toyota. One thing to remember every time there's a hiccup in one economy or another, is that many of these companies have a global reach--it really doesn't matter where their company headquarters is.
That's a good point, Anne. Thanks.
What's the EM index fund that Steve favors?
Looks like Vanguard MSCI Emerging Markets ETF (VWO), Manny.
Alright, ready for our next question from Jerry?
And while we're still on the topic of international markets, we actually have a follow-up from Sarge as well
Jerry, we wrote a story a couple of months ago making the case for buying gold stocks over gold bullion and specifically mentioning the Tocqueville fund. It was not a good call, at least not for the short term. That means gold stocks are even cheaper today than they were a couple of months ago. I own a gold ETF and am sticking with it.
Sarge, I don't have that good a feel for foreign REITs. That said, the March issue will contain a brief article pointing out that foreign real estate funds were the best performing group of all in 2012. It quotes the managers of the Fidelity and Forward funds as saying the stocks still look attractive.
I want to clarify that I own an ETF that holds gold stocks. I also own one of the ETFs that tracks the price of bullion. Together, they account for 3% of my investments, so this is by no means a big bet
On gold, you have to ask yourself why you want to own it before deciding on a fund vs. an ETF that tracks that bullion itself. Gold stocks, because they're stocks, can run into headwinds that the metal doesn't have--there might be production problems, or a general market downdraft, for instance. If your purpose is insurance against Armageddon--and you'd want to limit that to a slice of a slice of your portfolio--then an ETF that tracks the metal itself might do.