While most of us are enjoying the raw spectacle of the NCAA basketball tourney, another crowd will be looking at things on a much different level. The real hoops nuts -- not to mention the betting crowd -- will be watching the matchups closely, then eyeballing the stats to try and figure out who's likely to come out on top.
Anything can happen in a single game, but underlying figures such as rebounding, steals, and three-point and field-goal percentages will provide a lot of hints. Let's put it this way: With five seconds left on the clock and a slim lead to protect, you want the opposing team to foul your 90% free-throw shooter, not the guy who muffs half of them off the front of the rim.
Over the course of a season, the numbers that teams and players pile up amass a reasonable amount of predictive power regarding their future performance -- at least, that's the hope of all those oddsmakers and pool betters out there.
No hoop dreams on the trading floor
Luckily for those of us who do our betting in the stock market, the long-term performance of cash-producing companies is well-established. If you don't believe me, take the word of Wharton finance professor Jeremy Siegel, who's shown that investing in solid dividend-paying companies beats the market with lower risk.
His research demonstrated that Altria (NYSE:MO), with a dividend-adjusted annual return of 19.75%, was the best of the original S&P 500. It outperformed legions of hot-and-cold glamour stocks like IBM (NYSE:IBM), at just under 12%, or Eastman Kodak (NYSE:EK), at less than 8%. And it wasn't the only one. Boring companies like Wrigley (NYSE:WWY) and H.J. Heinz (NYSE:HNZ) returned better than 14.5% per year for nearly half a century -- beating the benchmark S&P's 10.9% annual gain -- thanks largely to the power of reinvested dividends in stable, cash-producing companies.
If you want to make smart bets on the future, I'd say these are clearly some numbers worth playing.
Better numbers to bet on
I'm not the only one around here who's high on these dividend kings. In fact, my colleague Mathew Emmert devotes his Motley Fool Income Investor newsletter to what he's described as the "predictive power of dividends." His point's not too different from what we've already discussed: Not only do dividends pay you cash up front, they also help you identify superior companies that are more likely to reward shareholders for the long term.
And like the stalwarts of old, many of Mathew's picks are decidedly out of favor with the market, which is just fine with those of us who follow the newsletter (myself included).
A couple of examples: Heinz, already a long-term market beater with major market share, hasn't exactly excited the Street lately. But it continues to show moderate growth and yields a decent 3% dividend. The longer this recommendation stays undervalued, the more shares those dividends will buy you.
If you like thicker wads of cash, look at some of the telecom recommendations. Compania de Telecommunicaciones de Chile (NYSE:CTC), to name just one, yields more than 9%. By my estimate -- a bit different from Mathew's -- the shares look like they're worth $13.40 a pop, giving them a 36% discount to today's prices.
Will they get there? Hey, as far as I'm concerned, they can take their time doing it. I wouldn't be a bit surprised to see that dividend yield alone beat the market's average this year and next. And the longer I can roll that yield back into more shares, the better my eventual returns will be. By the way, there's at least one more overseas telecom on Mathew's list selling at a 30% discount to my nearly-no-growth estimates, and it's also yielding more than 5%.
If these look like the kind of numbers you'd like to play, a free one-month ticket to Motley Fool Income Investor will let you scan all the selections and dig into the numbers, so that you can decide for yourself who the big winners will be.
Seth Jayson loves a cheap stock that throws cash back in his lap. At the time of publication, he had shares of Telecom de Chile (CTC) but no positions in any other firm mentioned. View his stock holdings and Fool profile here . Telecom de Chile and Heinz are Income Investor recommendations. Fool rules arehere.
