Rarified air

Can you hear the wind whistling? Have we reached the precipice? Are we staring down the abyss?
Who knows. Equity prices keep creeping up. Earnings seem to be up, in spite of anemic guidance and endless fears of tightening credit, rising interest rates and the like. International hot-spots continue to be hot. It's all a muddle.

One thing is certain; fewer companies in my universe of stock candidates are clearly under-valued, and those that are have warts, for the most part. I own 50 some-odd dividend payers, mostly dividend growers and I scan them repeatedly for valuation problems. I have sold a few clearly over-valued equities, rotated into others at fair value, trying to strengthen the quality of the earnings and dividends. I'm trying to buy more of the stuff people can't do without, and less of what they can avoid buying in a tight spot.

I'm mostly keeping with that 3% dividend threshold, although a I'm letting a select few 2.5% payers into the fold if they have a solid dividend growth history. I'm also scanning for companies I don't own but want to. Most of those that fit that category have serious valuation issues. I'm taking advice to heart from the masters that purchasing at high valuations can destroy a lifetime of position growth potential.

I find that one of the hardest things to do is to sit on cash and I can't sell options in my 401k account, so cash covered puts are out. I've been lurking around the small cap world, looking for some hidden issues that the big shops don't write about constantly. They aren't easy to find.

I have less problem continuing the DRIPs in this environment, because a few commission-free stocks are diluted into a much lower cost-basis and additional shares also contributes to rising dividend payments. If I weren't DRIPing, there'd be an accumulation of cash and no really tempting investments to make.

There are only two ways out of this situation; rising earnings or a market correction. Rising earnings would be good, but one doesn't hear much positive news about the world economic health status. I wonder if this is an artifact of the media, which grasps at every piece of potential bad news and rarely emphasizes anything positive about the world.  Earnings don't lie for the most part, and the world interprets flat or softening earnings as reason for doom and gloom. No-one wants a correction, but dividend investors like me would prefer to buy stocks when valuations are down, so that may be the price we pay to put new money to work. It's certainly hard to look at the portfolio value dropping, but if the dividends are preserved or even growing, then one should force oneself to see that as a fundamentally good thing.
I'm not particularly good at selling holdings at higher valuation. I'm not happy with a big cash balance. Although I have dabbled in options, I'd still rather be long than betting on market movements one way or the other.  So, in spite of rising anxiety around me and the temptation to "do something", I think I'll just sit tight.