Are We There Yet?

December 16, 2008
Special Feature

To many financial experts, trying to forecast a market bottom is a fool’s game. In recent weeks, however, many non-fools, including investment legend Warren Buffett and Bill Miller, whose Legg Mason Value Trust fund beat the S&P500 for 15 consecutive years, have told investors that the market had finally bottomed out.

To many financial experts, trying to forecast a market bottom is a fool’s game. In recent weeks, however, many non-fools, including investment legend Warren Buffett and Bill Miller, whose Legg Mason Value Trust fund beat the S&P500 for 15 consecutive years, have told investors that the market had finally bottomed out. Subsequent market dives proved them wrong.

When the best investment minds can’t come up with an answer, an individual investor can’t possibly know when the market is about to turn around. Some investment gurus, however, are looking at dividend plays as a way to lock in a decent yield while hoping for a lift-off in stock prices. There are some well-regarded stocks that are currently paying dividends above 4%, which is better than a savings account or a money market fund. The list includes drug makers AstraZeneca, with a yield of close to 5%, and Bristol-Myers Squibb, with an almost 6% dividend. Also paying dividends of around 4.5% are consumer goods giants H.J. Heinz, Kimberly-Clark, and Unilever.

Experts also caution, however, that hunting for high-dividend stocks requires an extra dose of due diligence. A high dividend yield could mean that the stock price is depressed and it may be depressed for good reason. Investors may have little confidence that the company can survive the current crisis and have beaten the stock down to point where the dividend yield has soared.