Yields are more important than ever

Last week was just another one of those rough weeks we have gotten used to:


Dow Jones --- 1 week




Wed-Thus was the worst 2 day session in years which brought the Dow below 9K. The banking crisis is receding to some extent after central banks around the world have been throwing $B & $B at banks. But huge problems remain.

Las Vegas Sands Corp. (LVS) will announce next week how it plans to avoid defaulting on $3.8B. Maybe problems with this loan helps explain why banks are hesitant about lending.

• Person: Las Vegas Sands to detail plans next weekAP(Fri, Nov 7)

Dividends & yields have become increasingly important for very smart investing during these times. When all divs are under suspicion, looking to the Standard & Poor's 500 Dividend Aristocrats can provide names of companies with reliable divs. Nearly 60 of the Standard & Poor's 500 have track records of at least 25 consecutive years of annual div increases. Unfortunately, S&P is not making the list widely available but recent ones can be found on the web. Since they are dated, it should be kept in mind that most banks have or will be removed removed from the list, only State Street (STT) & US Bancorp (USB) remain. Others on the list may be taken off by next year including: Masco (MAS) even though it has a 50 year track & General Electric (GE) plus Pfizer (PFE) & Eli Lilly (LLY) with their high yields show investors worry about how patent expiration on important drugs may affect their divs in a few years.

However many on the list are doing well & look like they will get thru this financial storm with additional annual div increases. A few that might be checked out because of their good earnings coverage for the div include: Coca Cola (KO), Kimberly Clark (KMB), VF Corp (VFC), Walgreen (WAG), Johnson & Johnson (JNJ), Procter & Gamble (PG) & Wal-Mart (WMT). These are not specific recommendations since I'm not familiar with all their problems, but companies like these with good earnings should be able to remain on the list for many years.

The very brave can also look to other securities with very high yields. Many MLPs, REITs & high yield (junk) bond funds have yields well into double digits. Well run ones should survive & high monthly or quarterly divs will be welcome during continued financial turmoil.

The biggest financial problem today is survival of the 3 big autos. Given the current economic environment, it is difficult to see how stock markets can mount a significant rally for some time. Tax loss season is here, making matters worse. Dividend yields (or distribution yields for MLPs) should make stock market gyrations easier to take.