Important Disclaimer: Ken Kam, Marketocracy Data Research's Editor in Chief, also is portfolio manager for mutual and hedge funds advised by a Marketocracy affiliate. Before relying on his opinions, always assume that he, Marketocracy, its affiliates and clients have material financial interests in these stocks and hold or trade them contrary to those opinions. Continue reading for more detailed and important disclosures, disclaimers, limitations and material conflicts of interest.
Going where the dividends will be
Today, investors looking for dividends are finding slim pickings. Many stocks that investors used to count on for income have either slashed their dividends or eliminated them completely.
Wayne Gretzky once said that, "a good hockey player plays where the puck is, and a great hockey player plays where the puck is going to be." I think this applies equally well to great investors like Eugene Groysman , one of Marketocracy's mFOLIO Masters. Instead of buying stocks that are paying meager dividends, Groysman is buying stocks that he thinks could be increasing dividends in the future.
Which stocks might those be?
Groysman thinks the banking sector is a good place to look. After taking tremendous losses last year, many banks cut their dividends to rebuild their capital and repay the money they took from the government through TARP. However, now that banks are paying close to zero interest for short-term deposits their profit margins on their loan portfolios have increased to the point where the strongest banks have been able to repay their TARP funds in less than 1 year!
The question is, what are they going to do with these profits next year? Since many banks paid dividends consistently for a very long time (until last year), Groysman anticipates that healthy banks will start to restore their dividends.
In a previous article, Groysman told us why he likes US Bancorp (USB). Today, I'm going to let him explain his thinking about Barclay's PLC ADR (BCS).