Puplava quotes research showing that over 100 years, the stockmarket has grown by 5.4% per annum, but reinvesting the dividends raises the return to 10.1% p.a. Over a long period, this margin compounds up impressively.
Features he suggests you look for:
- a low P/E ratio (i.e. a high dividend proportionate to share price)
- essential industries - companies that make things people need constantly or frequently (e.g. energy, consumer staples)
- companies that have a record of increasing dividends over the years
- larger, more mature companies - ones that have gotten past the stage of having to plough back most of their profits into R&D
- strong cash flow and earnings growth
- good management and solid corporate governance
In response to a listener's question, Puplava opines that the utility sector is currently "grossly overvalued", but says there may be reasonably-priced shares available in oil and consumer product companies.