Mad Money

The Best Protection Against an Unfair Market


When even seventh graders talk about how the market’s rigged, you know confidence in Wall Street has hit a low point.

That’s just what happened yesterday during Cramer’s visit to King Collegiate charter school in Brooklyn, N.Y. He was there as part of the Teach for America program, hoping to paint a good picture of stocks and what it’s like to work on the Street. But instead he was peppered with questions about a market “controlled by big rich people,” “crooked” Goldman Sachs and an investing environment that’s “not fair” for retail investors.

In Dividends We Trust

Cramer stammered, wondering what to say. He figured defending Wall Street at this point probably wasn’t worth it. Instead he changed the topic and started talking about the show.

Thinking back, though, his big regret is that he never defended stocks as an asset class. Nor did he stick up for what’s probably the one incorruptible part of owning stocks: the dividend. Well, during Tuesday’s Mad Money, he took time to say all the things he wished he’d said.

First, there’s little doubt the market can be unfair, but dividends are a great way to level the playing field. Consider these stats: Between Jan.1, 2000, and March 31, 2010, the S&P 500 dropped 20.4% and the Dow lost 5.6%. But with dividends, those averages are down just 4.2% and up 19.4%, respectively. Over the past five years? The S&P 500 dipped 0.9%, while the Dow has climbed 3.4%. Though, again, with dividends, the S&P add 10% and the Dow 17.8%. The numbers are even better if you go back 20 years – with gains well into the triple digits.

Dividends also work as tells that a stock is going higher. Cramer used this strategy in calling Hasbro , Core Labs , Ross Stores , Rollins and Wyndham , and they’re up 22% since versus the S&P’s 14% gain.

And then there’s the “accidentally high yielders” Cramer recommended when the market was buckling under the weight of financial crisis. He told viewers to collect the dividend while the share prices were low, and then collect a nice profit as those stocks rebounded. Sure enough, Eaton , once yielding 5.1% when it traded at $39, has almost doubled. And Chevron and Emerson Electric have followed similar tracks – or better.

This is why Cramer thinks investors can trust dividend stocks, even in an environment when it’s hard to trust at all. Dividends can’t be manipulated, he said. They’re “cold, hard cash.”

“Even if you believe that Wall Street is full of mountebanks, full of charlatans, full of liars, even if you think that the whole game is a sham,” Cramer said, “a dividend payment is still money in your pocket.”

Cramer's charitable trust owns Goldman Sachs.

Call Cramer: 1-800-743-CNBC

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