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.

-
IRS Names Its First CEO: But He’s Also Still Running Social Security
Tax News Will this new role make it difficult to address emerging issues like budget and staffing cuts and customer service concerns?
-
Ohio Property Tax Shock: Why Your New Assessment Is So High (And What Comes Next)
State Taxes Higher home valuations in Ohio have led to homeowner property tax relief. But is it enough?
-
The Spendthrift Trap: Here's One Way to Protect Your Legacy From an Irresponsible Heir
A spendthrift clause in an estate plan can protect an inheritance from a financially irresponsible child's debts and poor decisions.
-
Adapting to AI's Evolving Landscape: A Survival Guide for Businesses
Like it or not, AI is here to stay, and opting out could be disastrous for your organization. Instead, focus on what you can control and be flexible, as AI is still evolving.
-
Striking Gold (or Gas): A Financial Pro Unpacks the Nuances of Energy Investing
Investing in the energy industry, particularly oil and gas, involves understanding the facts about how projects generate returns through cash flow and long-term asset building, while also being aware of the risks.
-
Escaping the New Golden Handcuffs: A Financial Expert Has a Plan for Today's Executives
Feeling stuck in your job? It could be your complicated compensation package, but it also could be where you live, your family or even how you view yourself.
-
I'm a Financial Planner: Here's How to Invest Like the Wealthy, Even if You Don't Have Millions
Private market investments, once exclusive to the ultra-wealthy and institutions, have become more accessible to individual investors, thanks to regulatory changes and new investment structures.
-
Four Ways a Massive Emergency Fund Can Hurt You More Than It Helps
Saving too much could mean you're missing opportunities to put your money to work. Redirect some of that money toward paying off debt, building retirement funds, fulfilling a dream or investing in higher-growth options.
-
I'm a Financial Planner: How to Dodge a Retirement Danger You May Not Have Heard About
Timing is everything, and sequence of returns risk can mean the difference between a retirement nest egg that's overflowing … or empty.
-
Caring for Aging Parents: An Expert Guide to Easing the Financial and Emotional Strain
Early conversations, financial planning and understanding the progression of care needs can help to mitigate stress and protect family relationships.