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by Peter Switzer

Wall Street was riding high but then was shot down in late trade but this time the experts didn’t blame Europe but fears of China slowing down. But really the main reason would have been profit taking after a couple of good days, with a wall of worries out there for investors.

News overnight

I’m going to give a quick summary of the short-term story but then I’m going to reveal the important stuff for long-term investors. What’s that? It’s simple — great dividend-yield stocks for the long-term player who knows a massive rally will eventually happen.

So the Dow lost 179.79 points, or 1.61 per cent, to end at 11,010.9 while the S&P 500 dropped 24.32 points, or 2.07 per cent, to 1151.06.

Currently Europe is voting on adding more grunt to the EFSF, which will bankroll bailout packages and eight out of 17 euro-zone members have said yes and Germany votes tomorrow.

One thing I will say is there’s a lot more rescue talk going on in Europe — it’s amazing how more gets done when dopey politicians come back from holidays! If they stuff up this rescue mission of the PIIGS countries, they all could be on permanent holidays from politics!

On the US economy, durable goods numbers were slightly worse than expected but that’s no surprise. US economic data won’t improve notably for a couple of months.

What to buy

Now let’s get to the smart story — what do we buy in this tough market?

Well, the short-term player has to be ready to change his or her game plan nearly on a daily basis but the long-term investor should chase dividends or yields until the market starts its inevitable massive rally in 2012 or 2013.

A mate of mine who’s a good judge says the following stocks make up a good portfolio of dividend-payers and they include:

David Jones
Wesfarmers
Woolworths
Woodside
Origin
CBA
ANZ
NAB
Westpac
Ramsay Health
UGL
BHP-Billiton
Rio Tinto
Telstra
AGL

On current low share prices, the yield is higher than normal for the likes of BHP and Rio and collectively this group of stocks is yielding 5.97 per cent, which compares well with bank term deposits but when you throw in the franking credits benefit as well, the returns go up a percent or two, and you are still in the capital gain game for when that rally eventually turns up.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Thursday, September 29, 2011

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