In my last post I discussed how a large chunk of my personal wealth evaporated in weeks. The virus shut down the economy and ravaged all our stock portfolios. Thankfully, there was a rapid, but partial recovery. The Dow seems to have stabilized in the 23-24,000 point range. This is largely due to a “flattening” of the curve and treatment options for the virus. Congress and the Fed have collectively injected nearly $9 trillion into the economy to stabilize markets. Unemployment continues to rise, but Americans are receiving $1200 stimulus checks and increased unemployment benefits. With all this going on, the market appears to be pricing out 2020 entirely and focusing on the potential growth of 2021.
The power of dividend investing truly shines when the market is this volatile. As the market went down in March, roughly $400 in dividends was paid out and reinvested. In April I was able to reinvest another $500+ in dividends alone. April was boosted by a $95 semi-annual payout from Rio Tinto (RIO). This accumulated additional shares overall and these shares will likely be worth much more in 2021. And thankfully, the majority of my dividends are still intact. Cracker Barrel suspended theirs relatively early. Exxon’s payout is unsustainable but as of now they are still committed to paying shareholders. Even better, most consumer and healthcare companies are announcing dividend increases.
So, at the time of this writing, dividends in my personal portfolio are safe, for now. The virus appears to have become more of a political issue. Red states want to open and blue states want to stay closed for the foreseeable future. The question now is, how long will it take Americans and the rest of the world to get back to work? Analysts are predicting a strong end to the year and a decent 2021. Is this true or will consumer habits change for the long term? With all these uncertainties I believe it’s important to focus on quality. I’ve been buying stocks over these last few months, but I’ve been averaging in slowly. More importantly I’ve been buying the best possible companies.
For instance, one of my purchases was that of Microsoft (MSFT). Microsoft is somewhat of a monopoly and has a triple A credit rating, comparable to the U.S. government. I also added on to 3M (MMM), the maker of personal protective equipment. And, of course, I bought more Unilever (UL), a major supplier of consumer-packaged foods. I saw UPS as another decent pick as consumers continue to shift to online shopping. I understand the market will remain volatile and that we may even retest those March lows. But after this is all over, I believe all my companies will pull through. And hopefully we will be returning to growth in the latter half of 2020. The times we live in are scary but there is opportunity, provided we take advantage of it.
DISCLAIMER: I am long on CBRL, XOM, UL, and MSFT. I am not a licensed investment adviser or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.