www.bolseros.com ____

Scott Brown’s Upset Senate Election & Healthcare ETFs
by Michael Johnston on January 20, 2010

Highlighting the increasingly fluid political landscape in Washington, a relatively unknown Republican state senator claimed the Massachusetts Senate seat previously held by Ted Kennedy on Tuesday. Scott Brown’s upset victory over Martha Coakley, the state’s attorney general who had been a heavy favorite just one month ago, not only humbled Democrats already expecting a handful of difficult races in 2010 but also imperiled the health care overhaul that seemed to be on the verge of becoming law.

Brown’s election breaks the 60 seat filibuster-proof majority held by Democrats in the Senate, as the Republican will replace Paul Kirk, a democrat appointed to the seat until a special election could be completed. Once it became clear that Brown would pull off the upset, speculation turned to the health care issue. Many opposed to the legislation worried that democrats would attempt to delay Brown’s swearing in, pushing through the bill while Kirk still held his seat. But that outcome seemed increasingly unlikely late Tuesday. Virginia Senator James Webb, a supporter of the health care legislation, called for the Senate to take no votes until Brown could take his seat in Congress.

Some Democrats were proposing pushing the bill through the final House vote required to send it to the president. But Tuesday’s stunning defeat seems likely to push the issue to the back burner temporarily, as Democrats regroup and attempt to recalibrate a plan get the bill passed. Brown’s victory could set off a fresh wave of deal-making, and perhaps force Democrats to compromise on some of the bill’s more controversial points.

Health Care ETFs In Focus

As the health care debate has unfolded in Washington over the last six months, health care ETFs have moved roughly in lock step with the broad market, as investors have struggled to gauge both the likelihood and ultimate impact of comprehensive overhaul on the industry.

Brown’s election certainly hasn’t killed the legislation. Democrats are said to be considering the use of special procedural rules that would eliminate the need for 60 votes in the Senate, although such a strategy would likely produce a scaled-back version of the original proposal. So with the outlook on health care reform still cloudy, ETFs focusing on this sector will continue to be in focus in coming weeks. Although the fate of comprehensive reform will be in the headlines regularly, expect health care funds to show surprisingly little volatility, moving roughly in line with the market until a clear path emerges.

* Health Care Select Sector SPDR (XLV): This broad-based fund includes companies operating in every corner of the health care industry, including pharmaceuticals, health care providers, health care technology and equipment companies, and biotechnology firms.



* Vanguard Health Care ETF (VHT): Vanguard’s health care ETF provides another way to gain diversified exposure to the industry, investing in companies operating throughout the sector.



* iShares Dow Jones U.S. Medical Devices Index Fund (IHI): Don Dion recently noted that the medical devices ETF could be impacted by the unfolding political developments, as the “cost-cutting measures in the health care bill could impact the prices of frequently used items.” Since a significant portion of health care devices are currently paid for by the government, this area seems ripe for reform.



www.etfdb.com

Where to Find the Best Dividend Stocks

By Dan Caplinger
September 2, 2009

Investors count on dividend-paying stocks to provide them with regular income and a smoother ride than more aggressive investments. Now that the bear market in equities has turned the logic of the dividend-stock world upside down, smart investors are looking beyond their usual hunting grounds to find the best dividend stocks.

How the rules changed
Before 2008, dividend investors found many attractive stock prospects from two industries: financial companies and utilities. With financial institutions primarily making money by borrowing money cheaply and lending it out at higher rates, investors could expect regular, predictable profits that would support increasing dividend payments as those institutions grew.

Similarly, many saw the utility industry as the haven for the most conservative investors, with utility stocks earning a reputation as "widows and orphans" investments that would provide healthy amounts of income for shareholders without much risk of loss. Regulated by government agencies, many utilities could count on modest but nearly guaranteed profit margins in exchange for providing the services their customers needed.

Yet both financials and utilities have lost their good reputations among investors. Financials saw their shares decimated in the market crisis last year, as even huge banks like Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) resorted to cutting their dividends to conserve cash. And while many utility stocks have maintained their dividends, others, including Constellation Energy and Great Plains Energy, have had to cut dividends substantially.

Where the dividends are
So what should conservative investors do to maintain the dividend income they need? One idea is to look beyond the financial and utility sectors to seek out other stocks with good current dividend yields that appear to be sustainable.

To find them, I looked at a full range of sector ETFs covering the rest of the market's industries. I compared not only their dividend yields but also their returns over the past year and during the recent rally. Here's a full list:


Source: SPDR, Yahoo! Finance.

Of course, there's some subjectivity in weighing the various factors. For instance, industrials have fairly high dividend yields, but they've already seen share prices run up substantially in the rally, and they were more prone to losses during the financial crisis.

If you're looking for reasonable yields on stocks that haven't run up too much recently, then consumer staple stocks look like the best candidates right now. Core consumer staples stocks like Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO), and Philip Morris International (NYSE: PM) all have dividend yields greater than 3%. Moreover, based on their reasonable payout ratios, many consumer staples companies appear poised to maintain or increase their dividend payments for the foreseeable future. If you're looking for safety over the potential for explosive growth, then these defensive stocks should continue to serve you well.

The health-care industry, on the other hand, doesn't have the same obvious allure. Amid the current debate over national health-care proposals, companies like Pfizer (NYSE: PFE) and Merck (NYSE: MRK) have no assurance that their business models in the U.S. five years from now will look anything like they do now, or that they'll be able to maintain current profit levels. Yet unless a final resolution to the health-care controversy results in dramatic changes -- something that looks less and less likely, the longer it continues -- those companies will continue to play a major role in health care. Moreover, the higher yields that those big-pharma stocks pay compensate investors somewhat for their risk of future uncertainty.

Stay on the lookout
If the financial crisis taught us anything, it's that conservative investors can't simply assume that what's always been safe before will remain safe in the future. By keeping your eyes open to current trends, you can shift your portfolio to dividend stocks that will give you the best chance at getting safe, sustainable income for years to come.


www.fool.com

The investment includes companies from the following industries: health care equipment and supplies, health care providers and services, biotechnology and pharmaceuticals. This fund will normally invest at least 95% of its total assets in common stocks that comprise the relevant Select Sector Index. It has also adopted a policy that requires it to provide shareholders with at least 60 days notice prior to any significant material change in a its policy or its underlying index. It is nondiversified.