Market volatility has been a constant in 2015

Volatility is the one thing investors have been able to count on this year. The same pundits who were talking the market down four weeks ago now are upbeat about future stock-price appreciation. That, too, is something investors always can count on:  recency effect, or the tendency of investors to be influenced by recent events.

The trick: Don’t let recent events, like volatility, overrule your investment discipline.

Year-to-date through Tuesday, the markets generally were positive, with the NASDAQ up 6.2 percent, the S&P 500 up 0.3 percent and the DJIA down 1.4 percent. In August U.S. stocks officially entered a correction (a decline of 10 percent or more) and closed out the third quarter down about 7 percent for the three-month period.

Over the past few months, the markets have swung from positive to correction and back again. That kind of volatility can cause heartburn, to be sure, but had you liquidated holdings in August or September, you would have locked in your losses.

Volatility can provide an excellent opportunity to upgrade portfolio holdings at more reasonable prices.

For example, value stocks, which have uncharacteristically underperformed growth stocks for an extended period, are in many cases high-quality companies whose stocks have underperformed. “Quality stocks,” as defined by Morgan Stanley strategist Adam Parker in Barron’s last weekend, include those companies with “stable earnings and return on equity, stable and growing dividends and large market caps.”

Those stocks are trading at a discount to the market, and their dividends are growing. Remember, dividend growth provides insight into future earnings advances expected by management and the board of directors.

Analyzing the current dividend yield as well as the trailing three-year dividend growth of a diversified list of large-cap stocks provides perspective. For example, let’s look at  Microsoft (MSFT), Boeing (BA), Nike (NKE), Visa (V), Minnesota Mining and Manufacturing (MMM), Coca Cola (KO), Exxon (XOM) and Amgen (AMGN).

MSFT yields 2.7 percent with trailing three-year dividend growth of 16 percent. BA yields 2 percent and has grown 25.8 percent over the previous three years; NKE and V sport lower yields of 0.9% and 0.7%, respectively, but both have grown dramatically: 15.9 percent and 30 percent, respectively. MMM and  KO offer compelling yields at 2.6 percent and 3.1 percent with strong growth of 19.2 percent and 8 percent.

XOM is the highest-yielding stock of our sample group at 3.5 percent and still provides healthy historical growth of 11 percent annually. And then there’s AMGN, offering a current yield of 2 percent and annual growth of 30 percent.

Do not underestimate the power of the dividend and dividend growth. Volatility creates attractive opportunities that should not be underestimated. As notable investor Peter Lynch once said, “The real key to making money in stocks is not to get scared out of them.”

Mr. Volatility should take note.

Nancy Tengler is the author of “The Women’s Guide to Successful Investing,” a financial-news commentator and university professor. Reach Tengler at nancy.tengler@cox.net.