Investors are preparing their portfolios for a stock-market rally as the benchmark S&P 500 Index has jumped 13% since the end of August. By contrast, Pamela Rosenau, principal and chief investment officer of Rosenau/Paul Group, is sitting tight. Rosenau/Paul Group, which manages $700 million in assets, prefers steady dividend payers such as Chevron(CVX_) and Vodafone(VOD_), which help to smooth out stock-market fluctuations, she says. Rosenau also is managing director of HighTower Advisors.

Rosenau says she has an audited track record dating to 2000 that has handily beaten the stock market with a fraction of the volatility. Dividend stocks and master limited partnerships (MLPs) have buoyed her firm's portfolios in the past decade, when the S&P 500 has fallen in four calendar years. MLPs have high yields, liquidity and investment-grade debt. Large-cap companies can pay growing dividend yields that are outpacing some corporate bond yields, she says. Many large-cap stocks are trading at values that are well below where they were a decade ago. As a result, that asset class is attractive for the next 10 years, she says.

Source: TheStreet.com

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Summary only...

Telecom stocks have been winners this past year, and several analysts see still more gains ahead. Stocks in the telecom industry jumped 17 percent for the 52 weeks through Thursday, third-best among the 10 industries in the S&P 500 index. The overall market rose 9 percent over the same time.

The attraction for investors: dividends. Several telecoms offer dividend yields of 6 percent or greater. They can promise such meaty payouts because their revenue tends to be relatively stable; customers keep paying the phone bill after putting off other, big-ticket purchases. Such stability meant industry heavyweights AT&T and Verizon both boosted their dividends during the recession, when others were slashing dividend payouts. The 6 percent-plus yields look particularly attractive with savings accounts and bonds offering relatively meager rates.

Source: Kitsap Sun

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Summary only...

This is an intimidating time to be an investor. The market seems to unpredictably jump or fall without warning. However, in times like these, it is still possible for investors to persevere, and even grow their wealth. One of the easiest ways to find strong companies is to look for those that consistently pay high dividend yields, and then to reinvest those dividends. If you can find dividend payers that are also growing their earnings year over year, it's easy to just sit back and watch your portfolio grow. In fact, research has shown that, historically, dividend-paying stocks return about 5% more annually than stocks that do not pay a dividend.

To help you in your quest to get rich over time, I've identified four stocks to look at further. First, I wanted to find large-cap stocks, as they are typically less volatile and let you sleep easier at night. In addition, I screened for companies that had a strong but sustainable annual dividend yield, at least 4%; and to ensure that these companies are still growing, at least 5% growth in EPS over the last three years. The companies I chose also have four- and five-star CAPS ratings, which means they're favorites of The Motley Fool's 170,000-member CAPS community.

Source: Motley Fool

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Summary only...

This screen looks for the best combinations of expected dividend yield, dividend growth annualized over the last five years and strong return on equity. In addition, dividend payout ratios must be less than 50 per cent and earnings estimates must not have declined in the past three months.

Morningstar CPMS is a Toronto-based equity research and portfolio analysis firm. It maintains a database of about 660 of the largest and more liquid stocks in the country and spends a lot of time adjusting for unusual accounting items in each company’s quarterly results to make sure screens can perform correctly. CPMS tested the screen back to 1993 and found that it has returned 11.6 per cent annually since then, compared with the S&P 500 total return index of 7.5 per cent. It has also done well recently, returning 18.8 per cent over the past year versus 10.1 per cent for the S&P 500 total return index, and 5.9 per cent against 0.6 per cent for the same index over the past five years.

Source: Globe and Mail

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Summary only...

With many interest-sensitive investments paying bottom-of-the-barrel rates, yield-hungry investors are being drawn increasingly to dividend-paying stocks."The argument for them is that dividend stocks are the only yield vehicle that appears to be available right now," said Harry B. Banzhaf, president of Harry B. Banzhaf & Co. in Milwaukee. It's a good argument. After all, if retirees in particular don't earn some kind of "replacement rate" on their money, theoretically it will dry up, Banzhaf said.

During 40 years in the investment business, he's developed other reasons for favoring stocks with dividend yields of 3% or more. Over time, the highest proportion of common stocks' total return has come from the compounding and reinvestment of dividends. Also, Banzhaf says, stocks have been overpriced since 1998, and management teams are buying back shares rather than paying out profits in the form of dividends. "Companies are using shareholder money to buy back shares at the same time they're issuing them to themselves in the form of options," he said. Decent dividend yields are difficult to come by these days, but Banzhaf says he's found some reasonable places to find them.

Source: JSonline.com

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Summary only...

Some people have the strange idea that just because you're retired, your investing days are over. But nothing could be further from the truth. In fact, investing after you retire is one of the most important things you'll ever tackle -- and one of the most challenging.

A lot of things change after you retire. From a financial perspective, the biggest one is also the most obvious: You're no longer getting that big paycheck you used to receive. Granted, you also don't have some of the expenses that go with working, such as commuting costs. But with a whole lot more free time, it can take some doing to fill your days with activities that won't cost you more than you can afford.

Source: Motley Fool

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Summary only...

It isn’t every day that you get your opinion validated by the likes of Jeremy Siegel, the “Wharton wizard,” market commentator and senior investment strategy advisor for Wisdomtree ETFs. Siegel delivered a very bullish talk at Sourcemedia’s ETF 360 conference in New York. “Stocks have never been so much cheaper relative to bonds,” he said. “The ‘New Normal’ pushed by PIMCO’s Bill Gross is not new and it’s not normal.” That’s because that kind of negative view is based on Keynesian thinking, which is a poor predictor. For example, looking at the aggregated economic data failed to predict the post World War II boom.

Siegel displayed numerous charts showing that the long-term trend for stocks is upward. From January 1802 to June 2010, stocks have had a real return of 6.6%, he said, compared with 3.6% for bonds, 2.8% for Treasuries and 0.6 for gold. And over a 20-year holding period, an investor would have fewer losses with stocks than with bonds. This doesn’t just apply to U.S. stocks, but international equities as well. “In every country in the world over time, stocks beat bonds, showing that the equity premium is extremely robust,” he said.

Source: On Wall Street

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Summary only...

Metals and mining stocks provide higher dividend yields compared to peer stocks and offer investors stable income to overcome higher volatilities in the stock markets. A few of these stocks have been maintaining (or increasing) their dividend payouts for decades.

The S&P 500 has surged 3.4% so far in October, while the SPDR S&P Metals and Mining ETF (XME) gained 2.5%, underperforming the broader markets. Stable incomes and low beta values will likely help these stocks outperform peers.

Source: TheStreet.com

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Summary only...

The two-year-long vertiginous roller-coaster ride may have driven investors to safer and more stable investment destinations. Or so would suggest the steady stream of recent media articles that seem to place more-than-moderate focus on dividend stocks. Dividend funds, he says, have benefited more from a general desire for income in a low-yield environment. "I don't think it's so much a growth stocks versus dividend stocks [debate]."

The need for comfort in these volatile times is what it's about, says Serge G. Pepin, head of investments, BMO Investments Inc. "Over the last year, there's been more comfort with dividend-paying stocks rather than the growth stocks because of market volatility." The aging population is also driving investors toward dividend stocks. "Baby boomers are retiring, or are near retirement, and are looking for a stream of income, so yield is becoming increasingly important," says Pepin. "I think it is most definitely a real shift, not a passing fad."

Source: Advisor.ca

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Summary only...

Insider Monkey published an article last week showing how dividend yielding stocks beat the stock market by 5.4% when 10-year interest rates are below 2.5%. Investing in dividend stocks seems like a great idea if interest rates stay below 2.5% for a long time. Unfortunately, we can’t tell the future. Who knows where interest rates will be next month, next year, or the next decade? Let’s take a look at the long-term behavior of this investment strategy.

At the end of every year we picked the 20 highest dividend yielding stocks among the largest 500 stocks (between 1927 and 1950 we limited the universe to the largest 200 stocks, and between 1951 and 1965 the universe was the largest 300 stocks) and kept these stocks in our portfolio for exactly one year. Between 1927 and 2009, high dividend yielding stocks returned an average of 13.04% per year. The value-weighted market return was 11.68% during the same time period. The dividend stocks beat the overall market by an average of 1.36% per year. This is not negligible. The compounded return for dividend strategy is 3960 vs. 1990 for the broader market.

Source: Business Insider

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Summary only...

Dividend-paying stocks have a reputation of being slow, dull, and stodgy stocks, not particularly exciting prey for the active investor. After all, these are the stocks you just sit back and watch, collecting your check in the mail, right? No reason to buy and sell them at all, just buy and hold forever? Not necessarily! There is a lot of opportunity in dividend stocks to pursue returns, perhaps more than you might realize. I have worked with these stocks a lot, and have often thought to myself, "Someday I'm going to write all this down...". So, beginning today is a series of short articles discussing what I've learned about dividend stocks, how they REALLY work, and an examination of the basic strategies, of which "buy and hold" is only one - and sometimes, the LEAST profitable.

Since an individual stock cannot be trusted to follow its ideal price curve between dividends, averaging by diversification is the only choice. Buy a group of different stocks, preferably in differing sectors, all paying a high dividend, and hold them. The dividends become an income stream, and the yield-binding and diversification protects you from volatility in your capital. Sounds good, right? Indeed, it is good, and this is the strategy of many investors who seek the highest income from a pool of capital which must be preserved. The key property of this strategy is that no trading is needed. This is the "comatose investor portfolio" - the ideal portfolio for the investor who might lapse into a coma at any time and could not trade their account. Awakening ten years in the future is no problem if you have the coma portfolio! With careful selection of stocks yielding between about 5 and 15 percent, an investor can put together a portfolio which beats bank 3% CD yields by a big margin, with risk considerably less than growth

Source: My Happy Trading

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Summary only...

Credit Suisse(CS_) says U.S. stocks will trade within a narrow range. The bank predicts a ceiling of 1,200 on the S&P 500 and a floor of 1,000. It's no wonder the bank is recommending clients purchase dividend stocks. Here are 15 of Credit Suisse's 20 favorites. They are ordered by yield, from big to biggest:

15. PepsiCo(PEP), Dividend Yield: 2.9%, Forward P/E: 14
14. General Mills(GIS), Dividend Yield: 3.0%, Forward P/E: 14
13. Procter & Gamble(PG), Dividend Yield: 3.3%, Forward P/E: 15
12. McDonald's(MCD), Dividend Yield: 3.3%, Forward P/E: 16
11. Johnson & Johnson(JNJ), Dividend Yield: 3.4%, Forward P/E: 13
10. Kraft Foods(KFT), Dividend Yield: 3.6%, Forward P/E: 14
9. Kimberly-Clark(KMB), Dividend Yield: 3.9%, Forward P/E: 13
8. Excel Energy(XEL), Dividend Yield: 4.2%, Forward P/E: 14
7. American Electric Power(AEP), Dividend Yield: 4.6%, Forward P/E: 12
6. Bristol-Myers Squibb(BMY), Dividend Yield: 4.7%, Forward P/E: 13
5. Southern Co.(SO), Dividend Yield: 4.8%, Forward P/E: 15
4. Consolidated Edison(ED), Dividend Yield: 4.8%, Forward P/E: 14
3. Duke Energy(DUK), Dividend Yield: 5.5%, Forward P/E: 13
2. Progress Energy(PGN), Dividend Yield: 5.5%, Forward P/E: 14
1. Verizon(VZ), Dividend Yield: 6.0%, Forward P/E: 14

Source: TheStreet.com

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Summary only...

when you flip on CNBC or turn to your paper's business section, it's all gloom and anxiety. The talking heads are warning that the economy could be headed for a double-dip recession or maybe something worse. Individual investors have caught the pessimism bug too: At the end of August, only 21% of individual investors described themselves as being bullish, vs. about 50% who said they were bearish.

As merger-and-acquisition activity has begun to pick up recently, stock prices have also begun to rise. In addition, companies in the S&P 500 have boosted their dividend payments by nearly $14 billion so far this year, after slashing their payouts by $37 billion in 2009. Dividend-paying stocks have returned more than 10% this year, three times the return of the broad market.

Source: CNN Money

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Summary only...

The biggest mistake made by "retirement" investors is one of strategy -- they think in terms of "all in." They hear so much polarizing advice: to be in the market, or to be out. The average investor must read and interpret these arguments. Too often, they get it wrong.

The most important takeaway for this article is the need to consider and to balance various strategies. If you have all of the money you need -- good retirement, provision for heirs, etc. -- you should be absolutely certain to set aside enough to guarantee what you have already earned. There is nothing sadder than needless risk.

Source: A Dash of Insight

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Summary only...

When people discuss “the number”, i.e. the number they need to easily retire and continue their lifestyle they usually miss the entire point. The reason you are wondering what the number is, is because you are looking for the bare minimum you need in order to purchase your freedom from the slavemasters of corporate America. If you want to live in Manhattan and have a house in the Hamptons then you aren’t really looking for the Number. You’re still willing to be enslaved in order to achieve small incremental advantages over the overwhelming benefit of personal freedom.

Also worthwhile, find stocks that might not be yielding 10% now but have a history of raising their dividends so that eventually you could possibly get much higher than a 10% yield on your initial investment. Eli Lilly (LLY) is one that comes to mind since LLY, with a 5.2% dividend currently, has a history of increasing their dividends every year since 1967. McDonald's (MCD), which just raised their dividend to 3.25% but has raised their dividend every year for 29 years and still has all of China to look forward to getting addicted to their fries.

Source: Seeking Alpha

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Summary only...

What is Warren Buffett's biggest investing mistake to date? We no longer need to guess at the answer. In an interview that aired yesterday on CNBC, the CEO of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) said "the dumbest stock" he ever bought was ... Berkshire Hathaway. On the scale of mistakes, this was a beaut – Buffett estimates the opportunity cost of the investment at roughly $200 billion.

A $200 billion blunder for want of an eighth of a dollar. Here's the background: In 1964, Buffett was ready to tender shares he had accumulated in a small textile company -- Berkshire Hathaway -- back to the company. He met with the CEO and they agreed a price of $11.50 a share. Back in Omaha, Buffett received the official tender offer... at a price of $11 3/8! In Buffett's words, "He chiseled me for an eighth." Furious, Buffett refused to tender his shares. In a ruthless and vindictive response, Buffett instead accumulated more shares, eventually taking control of the company -- and firing the CEO.

Source: Motley Fool

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Summary only...

It seems like the debate regarding the merits of the "buy-and-hold" investing strategy is alive and well. We always find these discussions amusing, because we believe that it is such a pointless discussion. There is no general argument or case that can be made to support the buy-and-hold strategy or to negate it. The only true answer to the buy-and-hold argument is it depends on what and/or when you buy-and-hold. If you buy the right company at the right price, then buy-and-hold is a great strategy. If you buy the wrong company at any price, then the buy-and-hold strategy is a dumb move. Also, if you buy the right company at the wrong price, then buy-and-hold would once again be a bad move.

At the end of the day, the practical application of a well thought-out and disciplined buy-and-hold strategy has proven itself and really needs no defense. In the long run buy-and-hold will be more tax efficient and less costly than more active strategies. This is not to say that more active strategies can't be profitable, it simply means that they're more difficult, costly and riskier to execute effectively.

Source: Seeking Alpha

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Summary only...

"High yield" is always only relative to the price of a stock, it may just mean that its share price has dropped. But for the value investor, this isn't necessarily a bad thing. Sometimes, stocks show high dividend returns when their prices have been knocked by overly bearish investors, creating a golden investment opportunity for value hunters.

But how do you know when a high dividend yield stock is undervalued? Options trading can be a pretty reliable indicator in this department. Call options traders are usually savvy enough to recognize when a stock is trading below its fair value. They look for stocks expected to see significant upward momentum over the coming weeks. If they're buying call options on a high dividend yield stock, it means they think most of the bad news is already priced in, creating opportunity for near-term gains.

Source: Motley Fool

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Summary only...

Value stocks have long been regarded as safer investments than growth stocks. They tend to sport lower valuations and are often dogged by low expectations. So any stumbles can be taken in stride. But investors need to do their homework before pouncing on a value stock too quickly. A little digging may reveal more insights that take the shine off of any value play.

An uncertain dividend yield. Dividend stocks are often seen as value stocks. Their high yields provide an attractive source of income even if their shares have limited capital appreciation potential. But many investors mistakenly buy stocks with unusually high dividend yields. And extremely high yields -- in excess of 10%, for example -- can be a sign that the dividend will need to be cut. At the depths of the economic crisis, media firm Gannett (NYSE: GCI) offered a $1.42 annual dividend, even as its stock moved below $7, implying a dividend yield in excess of 20%. Management soon had to cut the dividend by 90%, and dividend chasers that didn't see it coming were burned. So it's important to see how operations are faring. If business has just turned south, a seemingly attractive dividend may be at risk.

Source: Street Authority

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Summary only...

Everyone’s scouring the markets for yield. So it’s no surprise that some say dividend stocks have been making a bit of a comeback recently in terms of attracting investors. (See previous posts here and here for more.) Here’s Credit Suisse stock strategist Doug Cliggott list of dividend stocks he says are “better than bonds.”

“This group of stocks had an average total return of 8.7% over the past three months, nearly matching the S&P 500’s performance. Perhaps this is evidence that the move into stocks with high yield and low beta characteristics is a durable investment theme,” Cliggot wrote in a note dated Oct. 13.

Source: Wall Street Journal

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Summary only...

There are very few sure things on Wall Street, but one is Wall Street’s history of creating too much of a good thing. Think back to the biotech IPO boom, the dot-com frenzy, and more recently mortgage related securities. Today everyone seems to jumping on to the dividend bandwagon. With baby boomers terrified that they won’t have enough income to fund their retirements, the trend is understandable. In the context of today’s low interest rate environment, the dividend story is compelling and history tells us that dividends are a significant component of equity investing returns.

The best scenario for dividend investors is for the economy to continue to bump along with the Federal Reserve keeping the liquidity spigot wide open. Should the economy materially weaken, dividend investors will need to start bracing for potential dividend cuts and or loss of principal. If the economy materially improves, investment momentum will likely shift away from stable dividend paying stocks to highflying growth stocks. Also, a material improvement in the economy would be accompanied by higher interest rates and investors may opt for more stable fixed income securities over common stock dividends.

Source: Business Inside

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Summary only...

During the 13 years between 1938 and 1950, when 10-year interest rates were below 2.5%, high-dividend stocks returned an average of 18.1% (including dividends) whereas value-weighted market returns (including dividends) totaled 12.7%. High-dividend stocks not only managed to outperform the market by 5.4 percentage points a year, they had higher returns in 11 of the 13 years. The worst annual return of high-dividend stocks was minus 6.7% vs. minus 11.2% for the broader market.

High-dividend stocks provided protection when the market was down. In fact, they beat the stock market in all down years. They also beat the stock market every time the stock market increased by more than 20%. If the stocks repeat the same pattern in the following years, investors chasing high-dividend large-cap companies will manage to beat both the bond and stock markets by a large margin.

Source: TheStreet.com

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Summary only...

Following two roller-coaster markets over the past decade, it's natural for investors to seek more stable and less stressful stock strategies. Dividend-paying stocks provide you with an opportunity to achieve both.

With stock prices still down from their 2007 peak and dividend yields relatively higher, now is the perfect time to double down on dividends and build a lower-cost, lower-stress stock portfolio worthy of holding for the next decade and beyond. There are plenty of great businesses with rich dividend histories trading with yields we haven't seen in years, but in addition to owning a few "dividend growth" and "high-yield" stocks, please remember to diversify your picks across various sectors. As we learned with the implosion of the financial sector, no matter how nice the dividends are, you never want to put all your eggs in one basket.

Source: Motley Fool

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Summary only...

Dividend-paying companies are the oasis in the desert of underperforming stocks. They offer solid payouts today, and not simply the promise of gains tomorrow (though they do offer that, too!). In fact, dividend investing is such an attractive alternative, that super-investor Warren Buffett has made it a significant component of his portfolio.

A great way to find outperforming dividend-paying companies is to examine the stocks in the "Dividend Achievers Select Index," an elite group of companies that have raised their dividends annually over at least the past 10 years. The list was created by Mergent and is now overseen by Indxis, which screens eligible stocks for liquidity and investability. The index features about 140 stocks for 2010.

Source: Motley Fool

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Summary only...

These are extraordinary times in terms of long-term bond yields. On the one hand, investors are skeptical about stock market returns after a poor showing during the past decade. On the other hand, bond yields are so low that it does not feel right to invest in long-term bonds. Currently, the 10-year bonds yield a measly 2.4% and real yields are below 1%. A ballooning US budget deficit and the threat of inflation keep several investors away from bonds. Some of these investors instead head to the stock market and invest in high dividend stocks. Is this a good strategy? Can high dividend stocks beat 10-year bonds or the stock market?

During the 13 years between 1938 and 1950, when 10-year interest rates were below 2.5%, high dividend stocks returned an average of 18.1% (including dividends) whereas value-weighted market returns (including dividends) were only 12.7%. High dividend stocks not only managed to outperform the market by 5.4 percentage points per year, they had higher returns in 11 of the 13 years. The worst annual return of high dividend stocks was -6.7% vs. -11.2% for the market. High dividend stocks provided protection when the market was down. They beat the stock market in all down years. They also beat the stock market every time the stock market increased by more than 20%. If the stocks repeat the same pattern in the following years, investors chasing high dividend large cap companies will manage to beat both the bond and stock markets by a large margin.

Source: Business Insider

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Summary only...

Let's look at what makes a "wealth machine." I call Altria and ExxonMobil wealth machines not because they were great companies (although they were) or because they paid a dividend -- after all, not every dividend payer can be called a wealth machine -- but because they consistently raised their dividends. And they were able to do that because they performed consistently well.

What may surprise you is that research by Robert Arnott of Research Affiliates and Clifford Asness of AQR Capital Management has shown that companies with higher dividend payout ratios -- the amount of the dividend compared to net income -- tend to have higher real earnings growth in the following 10-year period. In other words, they're better-run companies. And we already know what earnings growth means for a company as far as price goes.

Source: Motley Fool

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Investors looking for higher dividend yields may want to turn their attention overseas as international stocks offer some of the best dividend values. Foreign firms have traditionally held a more dividend-friendly culture, paying them to shareholders rather than keeping them as retained earnings. This is evident in the higher yields of international firms. The S&P 500 SPDRs (NYSE:SPY) was recently yielding 1.91%, versus the iShares MSCI EAFE (NYSE:EFA) which is yielding 2.46%.

While the greenback has been on a tear lately, the expected long-term decline in the dollar is another reason why investors may want international dividends in their portfolio. As these dividends are paid in euros, loonies, krona and yen, and then translated into dollars, investors can receive a higher payout as the dollar falls. This allows investors to enter into a quasi "currency arbitrage" transaction. By selecting stocks of nations that have good long-term prospects, such as Canada, and are appreciating versus the greenback, investors can increase their dividends over the longer term.

Source: Investopedia

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The current 15% cap on the dividend tax rate, enacted in 2003, expires at the end of this year. Without an extension, dividends will revert to being taxed as ordinary income, with rates scheduled to top out at 39.6% next year. Expect an extension at least through next year, wrote SmartMoney.com tax columnist Bill Bischoff last week (although he acknowledged his prediction might be too optimistic).

The large American companies that make up the S&P 500 index do not seem to be bracing for an environment in which dividends are less of a draw. They devoted $5.1 billion more to dividends in the third quarter, according to Standard & Poor's. Payment increases numbered 299, up from 191 a year earlier. The number of payment cuts shrank to 35 from 135.

Source: SmartMoney

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In an ultra low interest rate environment, high dividend stocks seem like a better bet than 10-year bonds that only yield 2.4%. AT&T is and has been one of the largest telecom stocks in the world and currently yields 5.92%. The current quarterly dividend is $0.42 per share and 10 years ago it was $0.254 per share. AT&T managed to increase its quarterly dividend by more than 60% over the past decade. Even if we assume that they only increase their dividend by the rate of inflation, AT&T can still beat 10-year bonds if it doesn’t decline by more than 5% per year. If AT&T trades above $14.18 in 2020, an investor would be better off investing in AT&T stock than in ten year treasury bonds.

Free insider trading data website Insider Monkey compiled the list of 5 stocks insiders are buying with at least $5 billion in market cap and 4% dividend yield. These stocks should beat 10-year treasuries unless there are substantial declines in stock prices and significant dividend cuts

Source: Business Insider

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It’s a great time to be in the large cap dividend stocks, said John Morris, managing partner at Crestwood Advisors, and Sarat Sethi, partner and portfolio manager at Douglas C. Lane & Associates.

“These companies are trading at inline—if not just above S&P—but will double, if not more, earnings power,” Sethi told CNBC. “Right now, this is the opportunity to invest in these companies for the next 3 to 5 years.”

Source: CNBC

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No individual, family, government of publicly traded company can operate long if they are spending more than they earn. That holds true for dividend stocks as well. At eDividendStocks.com we strongly recommend dividend investing strategies, but proper research must be done when selecting dividend paying stocks.

Not every stock can afford to pay a dividend. That’s ok and hopefully those companies are working to develop their business model so that they will have predictable cash flows in the future to sustain a dividend. Other companies try to impress investors by paying out a bigger dividend than they can really afford. This is no different than individuals who buy a bigger house than they can really afford just to impress their friends and neighbors. Eventually, the burden of jumbo mortgage payments leads to disaster.

Source: Seeking Alpha

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Is there a bond bubble brewing? In a recent post on The Smarter Investor blog, financial adviser Doug Lockwood examines what fixed-income investors should be concerned about in today's low interest-rate environment. "Quite simply, when interest rates go up, the value of existing bonds goes down because new bonds issued under higher interest rates are naturally more in demand than old bonds paying out under lower interest rates," he writes. To protect yourself from rising rates, Lockwood suggests a range of options, including buying treasury-inflation protected securities, low-duration bonds, and higher yielding, dividend-paying stocks.

Morningstar's director of personal finance, Christine Benz, recently discussed dividend-paying stocks in this article. She cautions investors that while high-quality bonds and many dividend-paying stocks provide investors with a steady income, there are big differences in the level of risk that investors are taking on when they buy stocks. Aside from the risks involved with investing in dividend-paying stocks, Benz says buyers should be aware of the annual fees of dividend-focused stock funds. Also, some funds hold stocks with higher yields than others, and some funds focus on stocks that have longer histories of consistently offering a decent yield. For interested investors, here are 7 highly-ranked dividend funds.

Source: U.S. News and World Report

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Dividend-paying stocks are in the spotlight right now--in fact, Morningstar's resident dividend guru, Josh Peters, worries they could be too popular. And while some investors have gravitated to dividend-paying stocks for their relatively robust yields when compared with high-quality bonds, the two asset classes are not interchangeable.

It's easy to see why dividend payers are getting attention. Stocks of some high-quality companies such as Johnson & Johnson (JNJ) currently feature higher yields than their bond counterparts, an unusual phenomenon that speaks to incredible shrinking fixed-income yields. And though their risks are greater, dividend-paying stocks also offer more capital-appreciation potential than most bonds do. Given that the economy appears to be stabilizing and interest rates could rise in the years ahead, many investors see dividend-paying stocks as offering an attractive mix of current income, stability, and growth potential.

Source: Morningstar

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There are many things to get worked up about as the midterm elections approach, but an imminent hike in dividend taxes isn’t one of them. The handwringers warn that if Congress ultimately doesn’t extend the Bush tax cuts, which sunset at year-end, then top marginal rates on corporate dividends will jump to 39.6% from the current 15%. That would supposedly deal a body blow to the stock market and to the hopes and dreams of retirees and others who depend on income investing. Well, I’ve got one word of advice for you: Relax.

Taxes on dividends aren’t likely to go up that much. Even if they did, the top rate wouldn’t affect that many investors. Research shows the tax cut had little impact on most dividend-paying stocks when it was enacted, anyway. And any emotional sell-off in dividend-paying stocks as a result of a tax hike is likely to be temporary. Because the simple fact is that for yield-hungry investors, dividend-paying stocks are the best, if not the only, game in town. “This is not going to be a big deal. It doesn’t change the relative value of dividend-paying stocks,” says Josh Peters, equity income strategist and editor of Morningstar DividendInvestor.

Source: MoneyShow

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Investors chasing dividends in these uncertain economic times have history on their side, CIBC World Markets says. Stocks surged in September, senior economist Peter Buchanan said in a research note, adding that “yield is still very much the name of the game though, and it will take more than one good month to reverse investors’ recent preference for ‘clipping the coupon.’”

“Those betting that dividend stocks will provide a useful portfolio anchor in that sort of environment have history as an ally,” he said. “On both sides of the border, dividend-paying issues have fared better over the medium term than those with low or zero payouts. The gap has been the widest in a period of subdued economic performance.” Since 1990, Mr. Buchanan’s research showed, “quality” U.S. dividend stocks have outpaced the S&P 500 by more than 9 percentage points, on average and annually, in years of economic growth below 2 per cent. That compared to a deficit of a “modest” 2 percentage points when expansion topped that mark.

Source: CTV

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Investors might be able to get the best of high-dividend stocks with tech-like features by blending both telecom and broader Internet-related ETFs together in a portfolio, according to some strategists.

“If you’ve been viewing telecommunications and technology ETFs as separate investments, it might be time to consider how they work together,” writes Tom Lydon, founder of ETF Trends, in a new article.

Source: Barons

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State Street Global Advisors, the ETFs unit of State Street Corp. (STT), came out Monday with its latest Snapshot report of industry activity. Its take on general asset growth was similar to several earlier reports. (SSgA showed ETF industry assets during September up 10.6% to $885 billion.) A few nuggets that stood out included:

Dividend investing remains hot. The report noted that the SPDR Dividend ETF (SDY) has grown to $3.5 billion in assets with year-to-date inflow of $2 billion. Besides the SPDR S&P 500 (SPY) at $11.5 billion inflow and SDY’s $715 million inflow, two others led the way for SSgA last month. Those were the SPDR High Yield Bond ETF (JNK) with $447 million inflow and the Technology Select Sector SPDR (XLK) at $343 million.

Source: Barons

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Dividends are voluntary payments from companies to shareholders to enable them to share in the profits. Some companies pay dividends and some do not. Although dividend paying stocks were common decades ago, most investors today hold a basket full of mutual funds and stocks that pay little or no dividends.

Since most stocks just follow the market in general, investors wait for the market to go up so their stocks will go up and increase their net worth. If the market goes nowhere, such as been the case for last 10 years, their stocks and funds go nowhere, and the investor is no better off a decade later. Add in the US Dollar decline and the real losses to your portfolio become even worse. Dividend paying funds and stocks usually move just like regular non-paying stocks and funds which is to say that they will rise in up markets, and go down in down markets. The difference is dividend paying stocks may pay you regardless of which way the market goes.

Source: TheUnion.com

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The search for higher yields is driving the biggest rally in seven years for telephone stocks, as investors ignore some of the lowest profit forecasts in the MSCI World Index.

“I know they don’t have earnings growth, but I am not buying them for growth but for their very high, abnormal dividend,” said Jacob De Tusch-Lec, a London-based fund manager at Artemis, which oversees $16 billion. “If I can see KPN paying 3 percent on their bond and giving me a dividend yield of 6 percent, why would I buy the bond?”

Source: Business Week

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There is a running argument regarding whether or not dividend paying stocks are interchangeable for bonds. The pro-bond side argues in favor of the stability of bond prices and the predictability of bond interest. The pro-dividend paying stocks side argues in favor of the potential for increasing dividend income coupled with possible capital appreciation. In the end, it all comes down to the question of risk versus reward.

Investor attitudes regarding owning stocks today, dividend paying or otherwise, is very poor. We believe this is due to the fact that equities, to the exact opposite of bonds, have gone from being very expensive to becoming inexpensive or at least reasonably priced today. Since calendar year 2000, common stocks in general have been awful investments providing little or no return to their investors. We argue that these bad results can be blamed almost totally on overvaluation.

Source: Seeking Alpha

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I narrowed the field to companies whose payout ratio was below 50%. My reasoning was that these companies' dividends are relatively safe and that there is still plenty of room for increases. But at least one commenter thought that this approach unfairly eliminated some excellent companies, such as utilities, tobacco companies, and real estate investment trusts, all of which deliberately pay out more than 50% of earnings to shareholders. Investors looking for higher yield immediately would be interested in just the opposite approach, starting with companies that pay out more than 50% of earnings.

And the Winner is... ...subjective (again). All of these companies have attractive properties, but the ultimate winner will depend on what is most important to each investor. The first three companies listed have double-digit expected earnings growth next year. But MSA and LEG, along with MO, have the highest payout ratios and MO, the winner of last month's Smackdown, easily has the highest yield. The bottom four (in the listing) have the lowest P/E ratios. MSA is the only one with a market cap below $1 billion, whereas the bottom three range from $16.78 to $50.06 billion in market cap. MSA, RPM, and Sysco were all more than 10% below their 52-week high, while LEG was close at 9.5%. (KMB was just 3.3% below its 52-week high and MO was just 1.3% lower.) So, once again all six finalists are deserving of further study for possible purchase.

Source: Seeking Alpha

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I get criticized lots lately for being bullish. I like that, though lately much of it is personal and snarky. I like that even more. Negative, cranky, dour sentiments are great building blocks for bull markets.

So my advice is to always be prepared to be wrong a lot of the time. I still believe there is a strong bull market ahead, and I am not bothered by snarky attacks. But even if you are less optimistic than I am there is probably room in your portfolio for well-managed, high-yielding stocks that pay out more in dividends than Treasury bonds and have good long-term-growth prospects.

Source: Forbes

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Dividend-paying stocks are appealing because they have a track record of beating the broader stock market. Focusing on the most undervalued names of the S&P's so-called dividend aristocrats means investing in the most undervalued companies.

Wal-Mart (WMT), Abbott Labs (ABT), Kimberly-Clark (KMB), Coca-Cola (KO) and Eli Lilly (LLY) are five companies in the S&P 500 with the best dividend growth and earnings prospects. The companies mentioned here also offer downside protection, given their products can be considered recession-resistant. For those particularly inclined to high dividend payments, Kimberly-Clark and Eli Lilly stand out from the rest.

Source: TheStreet.com

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In previous installments of this series (Part I, II, III, and IV), I screened the Dividend Champions list of companies that have paid higher dividends for at least 25 straight years (which can be found here) starting with companies whose latest increase was by 10% or more (in June), those with the highest yields (in July), those with the lowest prices (in August) and those with the most desirable 5- and 10-year Dividend Growth Rates and A/D (Acceleration/Deceleration) ratios (in September). Since I have added fundamental data to the listing that was posted on September 30, it's only natural that I use that as a starting point for this month's Smackdown. (As always, it's also important to screen for other positive qualities before choosing any investment.)

And the Winner is...
...subjective. All of these companies have attractive properties, but the ultimate winner will depend on what is most important to each investor. Procter & Gamble (PG) has the highest expected earnings growth next year, followed closely by AFLAC (AFL), Wal-Mart (WMT), and Valspar (VAL). But it also had the highest payout ratio, followed closely by Johnson & Johnson (JNJ), which had the highest yield. Medtronic (MDT) had the lowest P/E and payout ratio, and is the only one of these companies that is more than 10% below its 52-week high (not shown above) at 28% below that peak. Valspar is the only mid-cap, with a market value of just $3.14 billion, whereas Procter & Gamble, Wal-Mart, and Johnson & Johnson are each worth more than $100 billion. All six finalists are deserving of further study for possible purchase.

Source: SeekingAlpha

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In this screen, we turned our attention to low-risk stocks that have good records for dividend growth. In addition, our selection criteria focused on those issues that our analysts project to continue providing investors with dividends that are likely to increase at above-average rates. We began our search with stocks whose dividends have advanced at a compounded annual rate of at least 7% over the last five years. Similarly, we next narrowed the list to equities with projected annual dividend growth rates of at least 5% over the next three to five years. We also set a minimum estimated yield for the year ahead of 3.1%, which is 100 basis points (100 basis points equals one percentage point) higher than the current median for all dividend-paying stocks under our review.

The set of stocks that made the final cut are not only judged to be safer than most, but also possess proven and prospective dividend growth rates that have and are likely to advance at a rate exceeding the average rate of inflation under the time periods chosen for this review. Consequently, the list will likely appeal to conservative investors in search of current income. We note that this group is comprised of a fairly wide range of companies, not just regulated utilities and financial institutions as many past dividend-focused screens. Indeed, other industries, such as healthcare, had a strong showing. Not surprisingly, however, is the fact that our list is dominated by large-cap industry leaders, several of which are Dow 30 components. Here are some highlights.

Source: Value Line

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Summary only...

What's the average investor to do? Yields from super-safe, fixed-income investments like CDs and U.S. Treasuries are practically nil. Municipal bonds, once considered solid sources of income, are suspect now because of the increasing possibility that cities, states and other government entities will default. The stock market has recovered some lost ground but remains shaky, keeping shareholders on edge with day-to-day gyrations. People of all ages wonder where to put their money, but hardest hit are retirees. They count on income from their investments to cover living expenses, and they need to preserve principal.

Some companies pay shareholders quarterly dividends from their earnings. Shares of these companies or bundles of companies in mutual funds or exchange-traded funds are traded on major stock exchanges through investment companies, online brokerages and other venues. Stock mutual funds offer professional selection and management of a group of stocks, spreading the risk should any of the companies struggle financially. Dividends provide a stream of income to spend or reinvest. Dividend-paying companies often are financially strong, and their stocks offer some protection against profit erosion in the face of interest rate hikes, said Todd Feltz of FeltzWealthPlan.

Source: Omaha.com

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Summary only...

The best dividend stocks to invest in for 2010 pay secure dividends that the company can well afford. The payouts of the best dividend stocks are likely to grow somewhat with time too, because the underlying company’s prospects are likely to remain bright or even improve. Finally, the best dividend stocks of 2010 may provide capital gains as well, if they are undervalued. Even if the market goes down, these stocks are likely to hold their value, because their businesses, and therefore their dividends, are relatively secure.

Here are some ideas of the best dividend stocks for the rest of 2010 and beyond. You will want to check them out for yourself before you invest so your chosen stocks fit your precise circumstances, risk tolerance, and goals.

Source: Helium

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