An Alternative To Money Market Funds
February is behind us and what a month it turned out to be! The investment community again witnessed amazing volatility in the markets. The yield on the 10 Year US Treasury briefly traded below 1.65% and then jumped by over 50 basis points in a matter of weeks. Nevertheless, both the Dow Jones Industrial Average and the S&P 500 reached record highs during February.
Over in Europe, the Greek debt mess continues. Rest assured. There will be a snow storm in Hell before that debt is fully repaid. Greece officially owes its creditors about $370 billion. Its population is about 10 million. The country’s youth unemployment rate is over 50% according to Eurostat. Need I say more?
On the home front, America is doing fine. During February, several S&P 500 companies announced dividend increases. Their largesse was notable. Colgate Palmolive raised its quarterly dividend by 6% and announced a new $5 billion share repurchase program. Colgate has paid uninterrupted dividends on its common stock since 1895.
Both Coca Cola and Pepsi raised their quarterly dividend. Coke raised its dividend for the 53rd straight year upping the quarterly payout by 8%. Pepsi’s Board of Directors raised the quarterly dividend by 15%. Pepsi has paid quarterly cash dividends since 1965.
Lorillard, our #1 position, also increased its quarterly dividend raising the payout by 7%. We initially purchased the shares in August @ $60.20 per share. Suffice it to say, trades like this keep me in my clients’ good graces!
Despite the plunge in crude oil prices, I fully expect oil majors ExxonMobil and Chevron to increase their quarterly dividend this Spring. ExxonMobil’s dividend payments have grown at an annual average rate of 6.4% over the last 32 years. Last year, Chevron increased its quarterly dividend by 7% from $1.00 to $1.07 per share. For Chevron, this was the 26th straight year its Board of Directors increased the dividend.
T. Rowe Price joined the party as well. Its Board of Directors declared last month a Special $2.00 per share cash dividend. The Board also increased the quarterly dividend payout by 18% from 44c per share to 52c per share. Since the firm went public, this marks the 29th straight year the company has raised its dividend.
As the Federal Reserve minutes released last month made clear, interest rates will remain low for longer than many market observers anticipated. The Fed’s minutes showed how concerned the Fed is with weakness overseas. The Fed noted that the economic slowdown in China and tensions in the Middle East and Ukraine pose downside risks to the US economic growth outlook.
I now host a weekly radio show on WWPR 1490 AM in the Tampa Bay region. The show airs from 2pm - 2.30pm EST every Friday.
The show can also be heard live on the station’s website (1490wwpr.com). Taped broadcasts of each show are also available on my firm’s website (www.amescapmgmt.com). Enjoy!If you are unhappy with the returns offered by money market funds, feel free to contact us.