A slew of reader mail recently has raised some excellent questions about investing in dividend-paying stocks, an intriguing new Japan fund, valuations in the auto sector and the latest thinking on the energy sector. Here, some feedback and advice:
Dividends for the Long Run
Hello Steve, I am looking for a good dividend-paying stock fund. Any advice? Thanks, Larry Bethel Wichita, Kan. Hi Larry, In my humble opinion, one of the best options to invest in dividends right now is a fairly new exchange-traded fund: the iShares Dow Jones Select Dividend Index Fund ( DVY), which trades on the New York Stock Exchange under the symbol DVY. The ETF is a basket of 50 stocks picked for their long history of strong dividends and dividend growth. Among the biggest names are Altria ( MO), General Motors ( GM), FPL ( FPL) and Honeywell ( HON). The fund sports a dividend yield of about 2.1%. And the portfolio looks cheap relative to the broader market -- the P/E is about 13-14, compared with the S&P 500's 20. Plus, it's cheap in other ways -- the expense ratio is a mere 0.40%. If none of that grabs you, it's worth mentioning that Wharton professor and Stocks for the Long Run author Jeremy Siegel recently named it as a solid pick for 2004 in Fortune's 2004 outlook edition. Cheers, Steve
Will Sparx Fly in Japan?
Stephen, I was wondering if you looked at Sparx Japan before you wrote the Fund Picks for 2004 column ? I have been considering it since the 12/1 article in Barron's and finally found it available at their Web site last night. Looks like it became available sometime after 12/1 as it was not on the site when I first looked after reading Barron's. Thanks, Dale Simmons Lakeland, Fla. Hello Dale, I am intrigued by the Sparx Japan fund -- in part because Barron's, one of my favorite reads, considered it legit enough to write it up. New funds that focus on one hot area aren't always a sound investment -- remember all the tech funds rolled out in late 1999 and 2000? More often than not, new fund launches are about chasing hot performance on the part of both fund families and investors, which isn't a recipe for success. However, the Sparx Japan fund looks like a different kettle of fish. The manager, Shuhei Abe, is well-regarded and long on experience in Japan.