This Dead-Simple Strategy Just Delivered 17% Gains In 5 Days (2024)

If you’ve been reading my columns for a while, you’re probably sick of hearing about the “Dividend Magnet.” (I’m starting to think I should put it on my license plate. Too bad the California DMV has a seven-character limit!)

Well, we got another quick Dividend Magnet win last week, when my latest pick for our Hidden Yields service, FedEx Corp. (FDX), shot up 17% five days (including a weekend) after our buy call.

To be honest, we Hidden Yield-ers are used to seeing gains on stocks that grow their dividends fast, like FDX, which hiked its payout 112% in the last five years. Just not quite this fast!

You can see FedEx’s Dividend Magnet—or the tendency of its stock to pace its payout higher—in action in the five-year chart below. The payout pulls up the stock, which then shoots ahead, falls back and now, with last week’s jump, starts to close the gap again.

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As I wrote in the June issue of Hidden Yields, first-level investors tend to buy and sell FedEx late. The stock is, of course, a play on the growth of e-commerce, and back in late 2020 and 2021, they bid it up just as people were getting ready to leave their homes and explore brick-and-mortar retail again.

Then they gave us one more 14% pullback since March. It was a great setup, with the share price now far behind the payout, so we took advantage (thanks, mainstream crowd!): I issued a buy call in the June Hidden Yields, which dropped Friday, June 21.

Then on Tuesday June 25, after market close, FDX released its latest earnings report, showing the company’s cost-cutting plan was, er, delivering results, driving profits past expectations. Management also said it’s considering a spinoff of its FedEx Freight less-than-truckload delivery service, potentially unlocking even more shareholder value.

That provided the spark the stock needed to start closing the “dividend gap.” Our double-digit rally ensued.

The Dividend Magnet Is a Great Long-Term Strategy, Too

It’s a good example of how we use the Dividend Magnet to grab a growing income stream and price gains. The key, as our FDX example shows, is to buy when the price lags the stock’s payout growth. Then we “ride along” as the gap closes.

My favorite long-term example is Texas Instruments (TXN), which we bought in Hidden Yields way back on June 16, 2017. We then held on for five years as the price eventually caught up, then shot ahead of the dividend in January 2022.

That was our cue to sell—so we did, bagging 117% price gains and 130% dividend hikes, for a 148% total return (and dodging the 2022 tire fire in the process.)

Here’s something else most folks don’t realize about dividend hikes like this: They grow the yield on your original buy—and fast! At the time of our buy call, TXN boasted a yield of around 2.6%. But thanks to that 130% payout growth, they were yielding 5.8% on their original buy five years later.

If you’re like most folks, you’re probably nodding along as you read this. Truth is, most people know this is the right way to invest. They just haven’t had it laid out for them in quite this way before.

A Proven Buy Signal

TXN’s dividend-up, share-price-up pattern was well-established when we bought, giving us an idea of the gains we could expect, especially in light of management’s history of rewarding shareholders through constant dividend hikes and share buybacks.

Take a look at this chart in the five years leading up to our buy. The pattern is uncanny!

TXN is one of many examples we’ve profited from. Another is our recent buy of drugmaker Amgen (AMGN) in April 2024, which has already posted a 17% return. The company’s Dividend Magnet is proven:

Or food maker Mondelez International (MDLZ), which we bought in April 2020, just as lockdowns set in and restaurants fell off the menu. When we sold three years later—taking a 40% gain with us—the stock had caught up to, and overshot, its payout:

That was our signal to step out, and we’re glad we did: MDLZ has dipped 6.4% since, even as the broader S&P 500 gained 32%.

Look, I’m not going to tell you that things work out like this all the time. Sometimes market crashes (like in 2022, for example) mean it makes more sense for us to move to the sidelines and buy back in when prices are lower. Other times there are problems unique to companies that send a stock price permanently off-course. But there are plenty more examples like the ones above.

Finding the Next FedEx

So where does that leave us? Well, corporate America has plenty more juice for payout hikes: According to S&P Global Market Intelligence, US firms will spend $24 billion more on dividends in 2024 than in ‘23, growing their regular payouts an average of 6%.

Of course, some stocks will pay more, some less.

So we’ve got plenty of options to pick from here: the key, as always, will be to sift out the next FedEx: another unloved dividend grower whose share price has fallen off the pace.

Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: Huge Dividends—Every Month—Forever.

Disclosure: none

This Dead-Simple Strategy Just Delivered 17% Gains In 5 Days (2024)

FAQs

What is meant by 15 min strategy? ›

A buy signal is given when price exceeds the high of the 15 minute range after an up gap. A sell signal is given when price moves below the low of the 15 minute range after a down gap. It's a simple technique that works like a charm in many cases.

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It makes EMA more sensitive and more responsive to the current market conditions. Therefore, the exponential moving average may be considered the best moving average for a 5 min chart. A 20 period moving average will suit best. The MACD indicator is based on the exponential moving averages.

What is the 5 minute option strategy? ›

After you open a binary options trade, endeavor to wait for five minutes. If the market does not move in your favor after five minutes, you will either lose your initial deposit or receive the specified payout if your prediction is accurate. Note: Thoroughly research the market before you start trading options.

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The 15-minute rule means that you commit every day (at least the days you plan to work) to work for at least 15 minutes no matter what.

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The challenge of getting started and procrastination can be overcome by telling yourself: It's only 15 minutes. This makes it easier to achieve a flow state. Another strategy is to divide large projects into small tasks and divide them into 15-minute blocks. That way, you can celebrate a success every 15 minutes.

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Overview. This strategy calculates the 5-day, 10-day and 20-day exponential moving average (EMA) lines and uses the Super Trend indicator to generate buy and sell signals. It generates buy signals when the 5-day EMA crosses above the 10-day EMA and both the 5-day and 10-day EMA cross above the 20-day EMA.

What is the most successful moving average strategy? ›

The best way to trade moving average is to use the crossover strategy, where a shorter-period moving average crossing above a longer-period moving average generates a bullish signal, and vice versa for a bearish signal. This method helps indicate potential changes in the market trend.

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An SMA is calculated by adding all the data for a specific time period and dividing the total by the number of days. If XYZ stock closed at 30, 31, 30, 29, and 30 over the last 5 days, the 5-day simple moving average would be 30 [(30 + 31 + 30 +29 + 30) / 5].

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The 1-3-2 structure supposedly appears as a tree. The strategy profits from a small increase in the price of the underlying asset and maxes when the underlying closes at the middle option strike price at options expiration. Maximum profit equals middle strike minus lower strike minus the premium.

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Selling call options on a stock that is not owned is the riskiest option strategy. This is also known as writing a naked call and selling an uncovered call.

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The most successful options strategy for consistent income generation is the covered call strategy. An investor sells call options against shares of a stock already owned in their portfolio with covered calls. This allows them to collect premium income while holding the underlying investment.

What is the 15-minute approach? ›

Among them, "15-min pedestrian-scale neighborhood" means "residential area divided according to the principle that residents can meet their material, living and cultural demand by walking for 15 minutes; usually surrounded by urban trunk roads or site boundaries, with a population of 50,000 to 100,000 people (about ...

What does the phrase 15 minutes mean? ›

It is an allusion to a quote attributed to artist Andy Warhol in the 1960s. “In the future, everyone will be world-famous for 15 minutes.” Today the phrase is used as a wry commentary on how fame of some sort is common, but also fleeting.

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The 15-minute city model encourages creating neighborhoods where every essential service - be it grocery stores, schools, offices, parks, health centers, or cultural hubs - can be easily reached within a 15-minute walk or bike ride.

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In brief, it's where we advise you to drop everything, become 100% focused on the problem and try to come up with a solution. If, after 15 minutes, you can't solve the problem, then it's time to ask someone for help. Your time is valuable (particularly if you are paid to work on a project).

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