Why ASX dividend stocks are still winning this one horse race

The message is clear — the smart investors are ignoring (and taking full advantage of) the market's recent gyrations to snap up a bargain or two.

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What a wild ride the market has taken us on recently.

On Friday, the market suffered its single worst day in over three years on Friday.

"ASX loses $37b in worst day since 2012", read a headline from the Fairfax press.

Adding to the gloom, Fairfax also quoted Jeremy Grantham, founder and chief investment strategist of GMO, as saying that markets will be "ripe for a major decline" sometime in 2016.

Grantham is the man who foresaw the Japanese crash, the Dotcom bubble AND the Global Financial Crisis.

When he talks, markets take notice.

Not Warren Buffett, though.

Overnight it was confirmed his Berkshire Hathaway was splurging a whopping $A50 billion buying Precision Castparts, a maker of equipment for the aerospace and energy industries.

Grantham's a well-respected and successful investor.

Buffett's a well-respected, successful and incredibly RICH investor.

I know who I'd be backing…

Grantham's a classic pessimist. He's the type of guy that would probably find fault in Chris Broad's bowling performance in the first innings of the fourth Ashes test.

Same goes for the mainstream press. Doom and gloom sells newspapers.

It wasn't surprising therefore that the media feasted on Grantham's "ripe for a major decline" comments.

What many people conveniently overlooked were Gratham's comments about the forthcoming US interest rates hikes…

"… the markets will settle down, and most probably go to a new high."

Talk about having an each-way bet. Markets will crash, but if not, they will go to a new record high.

That's my type of punditry. Heads I win, tails you lose.

Here's the bottom line about economists — they get it right sometimes in much the same way as a weather reporter can tell you if you're going to need an umbrella, but there is no point in paying too much attention to their forecasts.

And as for the $37 billion that was wiped from the market last week?

The only losers were those who actually sold their shares, crystallising the losses.

What I can tell you though, is that the big four bank stocks are suddenly looking a little worse for wear.

Although they managed to recover some of their losses yesterday, they're still sitting well below their highs from early last week with Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia(ASX: CBA) hit especially hard.

For so long, the banks have been the go-to destination for do-it-yourself investors and SMSF's looking for a rock-solid income stream.

Now, it seems that not even their fat, fully franked dividend yields are enough to save them from the market's wrath, despite each offering grossed up yields greater than seven per cent!

Does that mean the 'Great Dividend Boom' is now well and truly over?

Not by a long shot!

Interest rates are still sitting at a record low of just two per cent, and are likely set to fall even lower. In fact, some pundits have their money on two more interest rate cuts before the end of the year!

That would mean an official RBA cash rate of just 1.5 per cent!

At the same time, investors are practically losing money in their term deposits once inflation and taxes are taken into account.

So much for the "Big dreams" on 3.2 per cent rates currently being offered by Citibank…

When it comes to superior returns, there really is no doubt about it: Dividend stocks are leading this one horse race.

If it's market-beating returns that you're after however, you're likely going to have to look a little deeper than the nation's biggest stocks.

It's obvious that investors are cooling on the Big Four banks, so in one sense it's difficult to blame investors for assuming the hunt for dividend gold has drawn to a conclusion.

Make no mistake though… there is still plenty of money to be made.

Take JB Hi-Fi Limited (ASX: JBH) for example. Yesterday the electronics retailer released strong results, including a seven per cent lift in its total fully franked dividend to 90 cents per share.

The market liked the results so much it pushed JB Hi-Fi shares up 10 per cent yesterday, at which level the shares traded on a fully franked dividend yield of over four per cent.

Even "bigger dreams…"

Here at The Motley Fool, we know how much our readers love a good fully franked dividend — it's why we launched Motley Fool Dividend Investor less than a year ago.

Our resident dividend expert Andrew Page has already uncovered some incredible opportunities for subscribers to his service, his recommendations soundly out-performing the market.

But here's the real kicker…

Remarkably, eight out of ten of Andrew's recommendations so far are beating the market — an incredible feat considering legendary investor Peter Lynch once said "In this business, if you're good, you're right six times out of ten."

In saying that, our investing horizon here at The Motley Fool is measured in years and even decades — not days or weeks. In other words, Andrew is only just getting started!

In fact, a little bit of market volatility like that experienced late last week is great as it gives us an excellent opportunity to buy high quality stocks at very reasonable prices.

Right now, that mightn't include the Big Banks, and even companies like Telstra Corporation Ltd (ASX: TLS) are unlikely to double or triple in the next few years.

But you can be sure that there are plenty of great opportunities just waiting to be found, but only if you're in it for the long-haul… and only if you commit to controlling your emotions on days like last Friday, where the market plummeted 2.4 per cent.

That's because you'll find tomorrow's big winners where no-one else is looking, and when no-one else is looking.

It's an investing approach that has served Warren Buffett very well over the years, so much so that today his net wealth stands at over $A90 billion.

A little stock market volatility hasn't stopped his Berkshire Hathaway making his largest ever bet to date, the $A50 billion acquisition of Precision Carparts.

The message is clear — the smart investors are ignoring (and taking full advantage of) the market's recent gyrations to snap up a bargain or two. You'd do well to follow their lead.

Andrew Page is no exception — right now he's putting the final touches to his latest ASX dividend stock recommendation which will hit the in-box of Motley Fool Dividend Investor members just after 4:30pm this afternoon! This stock is hardly a household name, but it's growing sales at a rapid clip and looks fantastic value at today's price!

If things go as Andrew expects, the cheap valuation and 8% forecast gross (fully franked) dividend yield could see this "under the radar" stock take off in the not too distant future.

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