After a strong rebound for many value stocks in February, the month closed with a couple of down days, setting the stage for a mild start to the month of March, when many traders traditionally look for a rally. More important, though, is the psychological boost provided by recent action in the stock market. Coming off a scary first month of the year, February gave hope to many who feared that 2016 might be like 2008 and 2009, the years of the "Great Recession." Instead of a rout among housing and financial stocks, the latest scare came from the collapse in oil and commodity prices, which led to distribution cuts by master limited partnerships (MLPs) and dividend reductions by commodity-related stocks.
While some pain in that area may continue to be an issue, the bad news has not spread throughout the market. Still, many are maintaining a wait-and-see attitude in response to the mediocre trends in corporate earnings. So short-term investors may be in for another month of volatility, as traders try to maintain a positive outlook.
Long-term investors are actually in a superior position. They can focus on owning solid, conservative stocks that have proven their worth over time and take advantage of occasional bargains to build up their portfolios.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Once again, the benefits of dollar-cost averaging and dividend reinvestment will become obvious as the current economy takes time to develop. Accumulating more shares of dividend-paying (and preferably dividend-raising) companies will reap rewards whenever the markets turn more bullish. That could be of extra importance if we see a prolonged series of up and down movements, as we have over the past year or more. The key to maintaining a strong psychological state is to focus on high quality companies that allow you to sleep well at night because of their strong balance sheets, earnings and dividend history and dependable products and services.
My current recommendation is Cracker Barrel Country Stores (symbol CBRL). Founded in 1969 and headquartered in Lebanon, Tennessee, Cracker Barrel Old Country Stores operates 635 combination full-service restaurant and gift shops in 42 states. Most are company-owned, not leased, and can be found along major highways. The restaurants, which feature homestyle country cooking, account for about 80% of revenues. The gift shops (20% of sales) feature rocking chairs, apparel, toys, cookware, ceramics and an array of food items.
According to Yahoo Finance, consensus estimates call for the stock to earn about $7.50 per share in the fiscal year that ends in July and $8.26 in fiscal 2017, compared with $6.82 in fiscal 2015. Officers and directors own 1.2% of the 23.9 million outstanding shares, which is down from 62 million in 1998. The $4.40-per-share annual payout results in a yield of 3.0% and has increased for 13 straight years.
What makes Cracker Barrel an attractive investment is its popularity among families and small groups looking for familiar, affordable dining that is consistent across a wide swath of states, primarily in the South and Midwest. Its gift shops provide a bonus stream of revenue and serve to attract the attention of diners waiting to be seated. Sales have grown from $2.43 billion in fiscal 2011 to $2.84 billion in fiscal 2015 while earnings per share have grown from $3.70 to $6.82 over the same time period. Although it already has a presence in 42 states, the company has plenty of room for expansion, as it operates only a small number of locations in many of those states. An added bonus is the fact that the stock holds up well during market declines, yet continues to offer value for the patient long-term investor.
Cracker Barrel is one of the many U.S. companies that offer shares you can purchase directly—and commission-free—through their company-sponsored dividend reinvestment plans (DRIPs). These companies actually pay the investing fees for you once you've enrolled in their DRIPs—and you can enroll with the purchase of just one share in most cases. To see my list of recommended DRIPs, please visit www.directinvesting.com.
Ms. Vita Nelson is one of the earliest proponents of dividend reinvestment plans (DRIPs) and a knowledgeable authority on the operations of these plans. She provides financial information centered around DRIP investing at www.drp.com and www.directinvesting.com. She is the Editor and Publisher of Moneypaper's Guide to Direct Investment Plans, Chairman of the Board of Temper of the Times Investor Service, Inc. (a DRIP enrollment service) and co-manager of the MP 63 Fund (DRIPX).
-
Prior Authorization Coming to Traditional Medicare Starting in 2026The Centers for Medicare and Medicaid Services (CMS) will implement prior authorization requirements for certain traditional fee-for-service Medicare services in six states starting next year.
-
The 60-40 Portfolio Rule of Investing: Not Dead Yet?Adding alternative investments to a balanced portfolio can smooth out returns.
-
The Hidden Costs of Caregiving: Crisis Goes Well Beyond Financial IssuesMany caregivers are drained emotionally as well as financially, leading to depression, burnout and depleted retirement prospects. What's to be done?
-
Cash Balance Plans: An Expert Guide to the High Earner's Secret Weapon for RetirementCash balance plans offer business owners and high-income professionals a powerful way to significantly boost retirement savings and reduce taxes.
-
Five Things You Can Learn From Jimmy Buffett's Estate DisputeThe dispute over Jimmy Buffett's estate highlights crucial lessons for the rest of us on trust creation, including the importance of co-trustee selection, proactive communication and options for conflict resolution.
-
I'm a Financial Adviser: For True Diversification, Think Beyond the Basic Stock-Bond PortfolioAmid rising uncertainty and inflation, effective portfolio diversification needs to extend beyond just stocks and bonds to truly manage risk.
-
I'm a Retirement Psychologist: Money Won't Buy You Happiness in Your Life After WorkWhile financial security is crucial for retirement, the true 'retirement crisis' is often an emotional, psychological and social one. You need a plan beyond just money that includes purpose, structure and social connection.
-
Retiring Early? This Strategy Cuts Your Income Tax to ZeroWhen retiring early, married couples can use this little-known (and legitimate) strategy to take a six-figure income every year — tax-free.
-
Ditch the Golf Shoes: Your Retirement Needs a Side GigA side gig in retirement can help combat boredom, loneliness and the threat of inflation eroding your savings. And the earlier you start planning, the better.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet SpotConverting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
