The major indexes took a step back Monday from their recent gains despite very little in the way of negative news and several encouraging earnings reports.
Coca-Cola (KO, +0.6%) topped Q1 profit and revenue estimates, reporting that global case volumes have returned to 2019's pre-pandemic levels. Harley-Davidson (HOG, +9.7%) also shattered expectations, upgrading 2021 revenue expectations to a 30%-35% bounce off 2020's levels (from 20%-25% previously).
One possible drag on the market, says LPL Financial chief market strategist Ryan Detrick, is too-high investor sentiment.
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"Excessive optimism can open the door for contrarian sellers to weigh on prices," he says. "When we upgraded our view on equities to overweight in late March 2020, one of the main reasons was the overriding sentiment backdrop of extreme pessimism that we felt limited the opportunity for further selling.
"This time around, many of our favorite sentiment gauges are becoming extremely bullish, which could be a near-term contrarian warning."
The Dow Jones Industrial Average (-0.4% to 34,077) and S&P 500 (-0.5% to 4,163) both fell from Friday's all-time highs.
Also heading lower was the Nasdaq Composite (-1.0% to 13,914), weighed down in part by Tesla (TSLA, -3.4%). The electric vehicle maker sagged after the fatal weekend crash of a 2019 Model S; police say no one was in the driver's seat when the vehicle collided with some trees.
Other action in the stock market today:
- The Russell 2000 dropped 1.4% to 2,232.
- U.S. crude oil futures improved by 0.4% to settle at $63.38 per barrel.
- Gold futures declined 0.5% to $1,770.60 per ounce.
- The CBOE Volatility Index (VIX) spiked by 7.8% to 17.52.
- Bitcoin prices fell off a ledge, declining 9.3% to $56,079. That actually represented a recovery off its weekend lows below $54,000, as it joined a number of other digital currencies that suffered sharp declines on Saturday and Sunday. (Bitcoin and Dogecoin trade 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Dividend Growth: The Path to Superior Returns
This earnings season, keep your eye on companies that up the ante on their regular dividend payments.
Why? Well, historically speaking, the companies that do so are going to be among your greatest drivers of portfolio performance. The American Association of Individual Investors, citing decades' worth of data from Ned David Research and Hartford Funds, notes that between 1972 and 2019, "stocks with rising dividends greatly outpaced the dividend cutters or non-dividend-paying stocks."
Companies in the S&P 500 that either started or grew their payouts returned 12.87% annually – better than dividend payers who kept their distributions level (11.85%), dividend cutters (10.88%) and companies that didn't pay a dividend at all (8.57%).
Fortunately, the market is chock-full of dividend growers from here and abroad. The Canadian Dividend Aristocrats and European Dividend Aristocrats, for instance, provide decent avenues to secure both decent yields and geographical diversification.
But the standard-bearers for dividend growth remain the S&P 500 Dividend Aristocrats, which must achieve at least 25 consecutive years of annual payout growth. If you're not familiar with the Aristocrats, or want to find out which companies have been added to the list this year, check our updated list of dividend royalty.
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