Many advisors tell clients that safety can be found by diversifying among asset classes, and they typically address the nervousness that clients express near market tops and bottoms, by suggesting that they shift from one class to another, advises David Fish in Direct Investing.
Yet one of the causes of underperformance among individual investors is over-trading and chasing yields (or recent pricing strength).
What dividend-reinvestment-oriented investors should keep in mind is that they may already have a degree of diversification that is superior to that of most investors and a concentration in high-quality companies.
So, unless the long-term fundamentals have changed for those proven businesses, it would be unwise to be riled by the emotions expressed by clueless investors or media, into taking unnecessary action.
Meanwhile, our latest featured dividend reinvestment stock pick is Foot Locker (FL). The company is what remains of Woolworth, which was founded in 1879.
It operates over 3,300 company-owned and franchise stores, selling athletic footwear and apparel, as well as sporting equipment and accessories, under various formats, including Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, and CCS.
It also operates a Direct-to-Customers division that sells through catalogs and the Internet. Its retail outlets are located in North America, Europe, Australia, and New Zealand.
For the fiscal year that ends in January, consensus estimates call for Foot Locker to earn about $2.78 per share and to net about $3.08 per share in fiscal 2015, compared with $2.56 in fiscal 2013.
The dividend was resumed in 2003 and now totals 80 cents per share annually, for a current yield of 2.3%, while the stock sports a Price/Earnings ratio of just 12.8.
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