Major Earnings Week Ahead

1. Hottest News This Week

WHAT TO WATCH FOR

📣 CPI READING

This week, major earnings reports are due from tech giants like Microsoft, Meta Platforms, Google, and Tesla, as well as other key companies such as General Electric, ServiceNow, Chipotle, Dexcom, and Caterpillar. These reports will likely influence their sectors and the wider market, particularly with new insights into artificial intelligence, cloud computing, online advertising, and business software.

Tesla is in the spotlight for potential changes in its growth strategy, including rumors about delaying its next-generation Model 2. Recently, Tesla lowered prices on several models in the U.S. and abroad.

📣 RATE CUTS

Financial markets have adjusted to the possibility that Federal Reserve rate cuts might be delayed or not happen at all this year. Now, only one rate cut is expected in 2024, likely in September. This is a significant change from earlier predictions of six rate cuts. As a result, yields on government bonds like the 2-year and 10-year Treasury notes have risen to near their highest levels this year, while stocks have fallen.

📣 EYES ON OIL

Recently, increased geopolitical tensions, especially from the conflict between Israel and the Middle East, have stirred market volatility. This tension typically affects commodity markets, most notably oil.

Following escalation news between Israel and Iran, WTI crude oil prices climbed to $87 per barrel, a high for the year. However, prices have since dropped, suggesting tensions might be cooling. The markets will be watching the Middle East for any possible escalation this week.

2. Matt Allen’s Corner

Maximizing Dividend Income

Hi Everyone! In my corner this week, I will outline seven practical steps to enhance your returns from dividend investments.

While investing in high-quality dividend-paying firms might suffice for long-term financial stability and steady income, several strategies can boost your dividend income further. As we will discuss throughout the article, these methods are straightforward and involve little extra work.

1. Dollar-Cost Average 💵

This approach involves regularly investing a fixed sum of money into dividend-paying stocks, regardless of the market's fluctuation. By doing so, investors can mitigate the impact of market volatility on their investment portfolio.

The primary advantage of dollar-cost averaging is that it allows investors to purchase more shares when prices are low and fewer when prices are high, leading to a lower average cost per share over time. This method is particularly beneficial for dividend investments, as it can enhance the overall yield of your portfolio. As you accumulate more shares, your dividend income potentially increases, even if the dividend per share remains constant.

Moreover, dollar-cost averaging disciplines investors to stay committed to their investment plan, avoiding the pitfalls of trying to time the market. Market timing is often risky and can lead to missed opportunities, especially in the case of dividend stocks, where consistent investment is key to maximizing returns.

This strategy is especially suitable for investors looking to build their portfolios steadily over time. ⏰ By investing a set amount regularly, you can grow your dividend income steadily, benefiting from the compounding effect of reinvested dividends. Thus, dollar-cost averaging is a powerful tool in the arsenal of any dividend investor, providing a systematic approach to building wealth and maximizing dividend returns.

2. Dividend Reinvestment Plans or DRIPs 

DRIPs are efficient for investors looking to compound their wealth over time. These plans allow you to reinvest your dividend earnings automatically into the company’s stock instead of receiving them as cash payouts.

One of the main advantages of DRIPs is the potential for compound growth. 📈 When dividends are reinvested, they purchase additional shares of the stock, which in turn will generate their dividends. Over time, this reinvestment cycle can lead to exponential growth of your investment portfolio as the number of shares you own—and consequently, your dividend income—increases.

Another benefit is the convenience and cost-effectiveness of DRIPs. Many companies offer DRIPs with no or low transaction fees and sometimes at a discounted price per share, making it a cost-efficient way to increase your holdings. This automatic reinvestment also removes the emotional aspect of investing, helping you stick to a long-term growth plan without being swayed by short-term market fluctuations.

3. Focus on Consistent Dividend Growth 

This approach involves selecting companies with a history of paying dividends and consistently increasing them over time. Companies that achieve this typically demonstrate financial health 💪 and a commitment to returning value to shareholders.

For example, consider a company that has increased its dividend payout yearly for the past decade. This pattern of growth suggests reliability and a likely continuation of this trend. Let's say a company paid a dividend of $1 per share five years ago and has increased it by 10% each year. The dividend payout would have grown to about $1.61 per share this year, reflecting a significant increase in return for investors who held the stock over this period.

It is advantageous to focus on consistent dividend growth because it often yields better total returns. Not only do investors benefit from the rising dividend income, but such companies often see share price appreciation as well, as the market recognizes their financial stability and growth prospects. 🤑

Investors who prioritize consistent dividend growth are generally those who seek both income and long-term capital appreciation. This strategy particularly appeals to retirees and other income-focused investors who value a steadily increasing income stream to help offset inflation and provide financial security.

To read the complete article, click here and check out our other articles 📚 in the VIP Member Hub! 🚀

Cheers,

Matt Allen

3. Comin’ Up

EARNINGS AND ECONOMIC DATA

💰 Earnings:

Monday: Verizon, SAP

Tuesday: Visa, Tesla, UPS

Wednesday: Meta, IBM, AT&T, Boeing

Thursday: Microsoft, Alphabet, Merck, Caterpillar

Friday: Exxon, Chevron

📈 Major Economic Events:

Monday: N/A

Tuesday: N/A

Wednesday: Durable-goods orders

Thursday: Initial Jobless Claims

Friday: PCE

The author of this newsletter owns ETF’s (exchange traded funds) that may hold ownership interests in the companies discussed in this newsletter as of the published date of this newsletter.