With the current disarray in the economy, much of the stock market has taken a tumble. Banks saw their share prices collapse; so did big brokerages and the auto companies. Some watched as their stocks lost over 90 percent of their value. Many investors have panicked, bailing out of the market altogether. And sometimes it seems impossible to find a good stock. But good stocks still exist, if you know what to look for.
The 3 "D's": dividends, debt and due diligence
Companies with strong brands and sound balance sheets usually reward their shareholders with dividends. As examples, Coca-Cola (NYSE: KO) has paid consecutive quarterly dividends since 1920. National Fuel Gas (NYSE: NFG) has paid consecutive quarterly dividends for more than 100 years. With a record like that, it’s a comfortable leap of faith that they’ll make the next quarterly payment as well.
Search out companies that are debt-free. They have the financial wherewithal to withstand an economic downturn. And don't invest based upon mere whims or a tip you got from some guy at the barbershop. By the time you invest, you should know everything about a company except perhaps the CEO's shoe size. A great place to begin is by surfing to www.quantumonline.com. This free service lists hundreds of stocks, preferred stocks and mutual funds. Another website for dividend-oriented investors is www.motleyfool.com.
Buy what you use or what gets used up
If you own shares of Ford Motor Co., don’t drive a Honda. If you adore Pepsi, don’t invest in Coca-Cola. If you own a company's stock, then buy what they make; in the long run you'll be helping yourself.
Consider stocks in companies producing products that are immediately consumed. Frito-Lay a, division of Pepsi's parent company Pepsico, is a prime example. When folks buy a bag of Fritos, they eat them right up, and then they have to buy more. As Frito-Lay is in the business of manufacturing snack foods, this works right out.
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Buy economic underpinnings
Some of the stock market's steadiest performers have been in the utility sector. Nobody can predict with certainty what the next blockbuster stock like "Google" will be. But can you imagine someone developing a practical alternative to electricity?
Retire your broker
Full-service brokerages charge commissions as high as 2 percent of the amount to be invested. On a $10,000 deal, they scoop $200 right off the top. Consider setting up an online brokerage account. Online brokerages' commissions are fixed, regardless of how many shares you trade, which leaves more money for you to invest.
Master Limited Partnerships
This special class of companies by law must distribute 95 percent of their available cash to their unit holders every quarter. These companies primarily own the pipelines that transport petroleum products and natural gas. Their customers lease capacity on these pipes, typically for 10 to 15 years. Thus, MLPs are considered "cash cows" by many investors.
Disclaimer: I do not own shares in any of the companies mentioned specifically by name.