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How To Use the Fed’s Double-Talk to Your Advantage

Get ready for a rally to 'quality' dividend stocks

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The time for that flight to quality is now.

I’ve mentioned earlier that the market this year is tracking 1995, which was a tremendous year for Wall Street. After a brief pullback during the summer, both the Dow and S&P 500 went gangbusters in the fall and finished the year up 33%.

Similarly, I believe that we’re reaching a turning point for high-quality stocks, particularly those with healthy dividend yields. I mention dividend stocks because they were taken down a notch by all the Fed speculation. That caused interest rates to jump higher, and investors panicked and turned away from dividend stocks. Anytime bond yields move higher, it makes investors nervous about anything with a yield on the theory that new bonds with higher interest rates would be more attractive.

All that looks about to change. Some poorly-rated dividend stocks will continue to flounder — to be sure — but their high-quality counterparts should thrive. The trick is to figure out how to distinguish between the two.

A good place to start would be my Blue Chip Growth newsletter, which currently includes no fewer than 19 dividend-paying stocks that are excellent buys right now. In addition to yielding nearly 2%, this elite group of stocks boasts 31% earnings growth and 6% sales growth on average. The best part is that thanks to the market’s knee-jerk reactions to the Fed’s every move, many of these stocks are trading at bargain prices. But if my projections are on the money—and 2013 pans continues to be a repeat of 1995—I don’t expect high-quality dividend stocks like these to be trading at such attractive rates for long.

So this is an exciting time to be a stock investor—if you are willing to absorb some near-term bumps, there are clear profit opportunities to be had.


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