The stock market is in great shape — Tuesday’s 200-point drop on the Dow Jones Industrial Average notwithstanding — and so are corporations, Hennessy Funds Chief Investment Officer Neal Hennessey told CNBC Wednesday.
“You knew it was going to happen just because there was a huge article in The Wall Street Journal talking about how the market hadn’t closed up or down over 100 points for the last four months. So that was a given,” he said.
But “nothing’s changed,” he added. “In fact, the market’s in great shape.”
Corporations, which have been “making a tremendous amount of money” since the dark days of 2008, are doing well, too, according to Hennessey.
His strategy is to look for companies that have the cash to offer a dividend, or to raise an existing dividend.
“If you look at Papa John’s, they earn $2.20 a share and don’t pay a dividend,” Hennessey said. “So there’s plenty of room for them to initiate a dividend.”
CVS Caremark, on the other hand, “pays 65 cents [a share as a dividend] and earns $2.50 to $3 a share, so there’s plenty of room to increase a dividend,” he noted. “So that’s what’s going to drive this market in a slow economy.”
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