May 8, 2016

Don’t Sell in May: Buy These 4 Dividend Growers Instead

If you “sell in May and go away” this year, you could be putting a whole year’s worth of returns at risk.


Now is the time to be adding top-notch dividend stocks to your portfolio. I’ll give you four my “second-level analysis” has uncovered in a moment.
First, here’s why “sell in May” is a flawed strategy that could cost you money.
True, stocks typically struggle in the summer months: since 1950, the Dow Jones Industrial Average has gained an average of 0.4% from May through October, according to the Stock Trader’s Almanac, compared to a 7.5% rise from November through April.
But jumping out of the market only to jump back in six months later is still a terrible idea. For one, you’ll miss out on dividends, which make up a big part of most investors’ long-term returns. And even at a 0.4% gain, you’d still be doing better than sitting in cash.
Plus, the pattern doesn’t show up consistently: from May 1, 2014, through October 31, 2014, for example, the S&P 500 rose 8.3%, but it gained just 4.9% from November 1, 2014, through April 30, 2015. So selling in May and coming back in early November would have put a big dent your 12-month return.
You’re better off using the summer months to fine-tune your portfolio, swapping out second-rate stocks (especially if they don’t pay dividends) for top-notch dividend-growers like the four below...

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