The Ultimate Money Guide for Bubbles, Busts, Recession, and Depression

Chapter 16. DIVIDENDS: YOUR SECOND GREAT INCOME OPPORTUNITY

When the country is struggling to lift itself out of a recession or depression, you don't want to take big chances with stocks that are small, unproven, and high risk.

Nor will you have to. You should be able to have your cake and eat it, too: relatively conservative companies, at deep-discount prices, with solid dividends and good growth potential. As Dad explains, that's precisely what he sought to do in the final years of the Great Depression:

Throughout the 1930s, my brother and I were continually looking for dividend-paying companies. We bought a few here and there. But the best single opportunity actually came as the Depression was ending, in a very conservative sector of the market.

Practically all other sectors had hit their lows in 1932 and 1933. But there was one major group that failed to recover significantly and then hit a new low at the end of the decade: utility stocks. While industrial stocks recovered, the utilities were clobbered and clobbered again. A key reason: Wall Street was afraid FDR was going to nationalize all utilities.

I worked as an analyst and business manager for a stock research company at the time. So I went to my boss, and I said: "FDR is already contemplating a war overseas. He's not going to fight another war at home. Let's get a study up on utilities. They're way down and they look like fantastic values." We got our staff together and spent a whole year researching the utilities.

I was deeply ...