How Dividend-Paying Stocks Can Smooth Volatility
Long-term investors should take advantage of current bargains and add solid companies such as Cracker Barrel to their portfolios.

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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free 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).
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
Medicare Prior Authorization Expands to Ambulatory Surgical Centers
Starting in December, Medicare will begin requiring prior authorization for certain procedures when performed in ambulatory surgical centers.
-
Frontier’s GoWild! Annual Flight Pass: Is the $299 All‑You‑Can‑Fly Deal Worth It?
Frontier’s GoWild! Pass offers unlimited flights for $299, but blackout dates, standby rules, and fees apply. See who benefits and if it’s worth it.
-
Greed, Fear and Market Volatility: A Financial Adviser's Guide to Keeping Emotions Out of Investment Decisions
Don't panic! And don't be so confident in the stock market that you overlook risk. Instead, be logical. Your retirement security could depend on it.
-
Want a Financial Adviser Who Shares Your Faith? Look for One With a CKA Designation
Financial professionals with a Certified Kingdom Advisor certification are committed to integrating biblical principles with sound financial advice.
-
10 Ways to Stay Safe From Grandparent Scams and Other Fraud, Courtesy of a Financial Planner
Scams are increasingly hard to detect, and anyone can be fooled, from older people to educated professionals. Here are 10 ways to avoid becoming a victim.
-
This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding Expert
Fueled by easy money, inflated tuition and high default rates, the student loan bubble mirrors the 2008 subprime mortgage crisis. We could be headed for a potential financial collapse. What can we do?
-
More Than Money: The Hidden Toll of Financial Abuse of Older Adults
Financial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your Dollars
The world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
The Unsung Hero of Aisle 5: A Tale of Forgotten Change and Compassion at the Supermarket
This supermarket manager went above and beyond to help when a child forgot her change at the checkout counter. You might be surprised at some of the complications that supermarkets face when it comes to customers' forgotten change.
-
Train, Integrate, Retain: A Strategic Playbook for Adviser Onboardings
Build a thriving practice by training new advisers with clear goals, structured processes and consistent mentorship for strong team growth.