Jim Cramer is still bullish on select dividend stocks and named names on Wednesday’s episode of “Mad Money.” Mortgage REIT Annaly Capital Mgmnt (NLY) is one name Cramer said investors should embrace, calling Annaly Capital a “buy.” The stock currently yields a whopping 14%. The Mortgage Investment Stocks Index is up about 10% in the past six months.
Chimera Investment (CIM), another Index constituent, with a 16.3% yield based on historical distributions, has returned almost 16% over the past six months while Dynex Capital (DX) has jumped 13%. Dynex Capital yields 10%.
For our seniors I recommended the purchase of master limited partnerships on Jan. 1, 2009, to help alleviate the lessening of income from their pension plans. I listed Kinder Morgan Energy Partners (KMP) as my favorite among this group. It had closed on Dec. 10, 2009 at a new high of $60.98. On Dec. 17, 2010 it closed at $69.25 per share, with a dividend payment of 6.4 percent.
Advisers at leading brokerage firms have since discovered this asset group, and sent MLP stocks rising, resulting in falling yields as prices rose. For example, when I'd first started recommending KMP, it was selling at a much lower price, with a payout of 10.1 percent quarterly. Despite this, I still listed five additional MLP's as a result of my research: In addition to KMP, they are: Boardwalk Pipeline (NYSE: BWP),Enbridge Energy (NYSE: EEP), Enterprise Products (NYSE: EPD), Magellan Midstream Partners (MMP) and Sunoco Logistics (NYSE: SXL).
“The Dogs of the Dow,” the 10 stocks in the Dow Jones Index with the highest dividend yield, usually perform better than the rest of the Dow components, so it is worth taking a look at the candidates for Dogs of the Dow 2011. A high dividend yield suggests the stock may be undervalued, providing an opportunity to buy a solid company at a good price. Using a search of Alacra Pulse we have compiled the latest analyst comments on the ten companies likely to make up the 2011 list.
AT&T (T) and Verizon (VZ): Despite concerns over the expected loss of its iPhone exclusivity, most analysts tracked by Alacra Pulse are positive on AT&T. The median price based on the the thirteen most recent targets featured in a November Alacra Pulse Prognosis is $31. Of these 13 analysts, seven have a positive rating and six are neutral. None are negative. Todd Rosenbluth, an analyst with Standard & Poor’s, this week reiterated his “strong buy” rating and $33 price target on AT&T. Analysts are mostly neutral on Verizon, even with an expected boost from the iPhone. Of 13 analysts featured in our November Prognosis, 4 have a positive rating, 8 are neutral and one is negative. The median target price is $34.
There's simply no escaping it: The financial collapse of 2008 and the current near-zero interest rate environment have changed the investing landscape, and unfortunately, too many people near retirement age are taking all the wrong steps when it comes to getting back on track. Despite having less money, fewer pension opportunities, and a malfunctioning Social Security system, people are still shockingly confident about their futures.
There's simply no overstating the importance of stocks that pay dividends. They give investors a chance to earn income (which will help them pay bills and stay liquid) while also providing the potential for capital appreciation. In the portfolio that I manage for my mom, who is 65, I have about 80% of her stock allocation in dividend stocks. Three that I happen to really like are Waste Management (NYSE: WM), Sasol (NYSE: SSL), and Exelon (NYSE: EXC). All three pay dividends of 3.5% or more and are inherently defensive in their nature. Stocks like Exelon and Sasol have the ability to jump up as well because of their ties to oil and natural gas. Or, if you're looking for broader diversification, check out the SPDR S&P Dividend ETF, which includes many of the S&P dividend aristocrats.
Want to retire in the next decade? Excellent! Today, I'm revealing three dividend payers that will get you there safely and provide an ever-growing source of income after retirement. It's time your money started working for you, and I'm confident these picks will do just that.
First up, Yum! Brands (NYSE: YUM), the company behind Kentucky Fried Chicken and Pizza Hut. I've already named it one of my favorite American stocks, and today I'm backing that up for 2020 retirees. My second dividend payer for 2020 retirees is Hasbro (Nasdaq: HAS), the company behind Transformers, G.I. Joe, Nerf, Milton Bradley, and a host of other well-known toys. Lastly, I'm recommending Wal-Mart (NYSE: WMT).
One advantage that stock dividends have over bond yields is that dividends generally rise over time as companies prosper. The dividend payment typically goes up, particularly at large, well-run companies. On the other hand, bond issuers never get together and decide to increase the yield on fixed rate instruments such Treasury or corporate or municipal bonds. One disadvantage of course is that stocks are far more volatile than short-term bond funds. So, if you go this route, you have to be ready for the downside risk.
In my view, with reasonable price - earnings ratios and decent dividends, selected high quality stocks look to be attractively-priced for patient, long-term investors. By high quality, I mean name brand companies with solid businesses, strong balance sheets, broad product lines and good dividend histories.
Investors want dividends these days. Maybe it's a fad, maybe it isn't. Either way, I think it's a good thing as long as it lasts. Dividends have historically treated investors very well because they: 1. Are a key component of total equity returns, 2. Are an indicator of a company's financial health and 3. Provide downside protection in the form of "yield support. I could continue, but I'm going to assume you're already convinced of the importance of dividends. And in that case, what you're after is which dividend stocks you should be herding into your portfolio.
In a paper from Tweedy, Browne titled "The High Dividend Yield Return Advantage," the revered value manager brings together a collection of academic and Wall Street research that not only highlights the need for dividends, but extolls the virtues of higher-yielding equities. One of these reports in particular -- a 2006 paper from Credit Suisse titled "High Yield, Low Payout" -- caught my eye. By studying stock returns during the period between 1990 and 2006, the researchers came to the conclusion that investors should focus on higher yields, but not simply the highest yields. They found that the best performance was captured by investing in the highest-yielding stocks that also had the lowest dividend payout ratio.
The Dividend Champions are 98 stocks that have increased their dividend payout for 25 consecutive years or more. Actually, including Challengers and Contenders, the full document now includes stocks all the way down to those with 5-year streaks. This is a fabulous research tool for dividend-growth investors. Today’s idea is to create a “periodic table” of the Champions. The idea of this Periodic Table of Dividend Champions is to organize the Dividend Champions by their current yields and 5-year dividend growth rates.
In dividend-growth investing, one necessity is to select the right stocks to fit the strategy. For example, one might decide that s/he is not interested in stocks with a yield of 2% or less, or in stocks that haven’t managed to grow their dividend by more than 5% per year over the last 5 years. I have shaded those portions of the table. Remarkably, those two simple requirements eliminate more than half the stocks from consideration. Of course, they also eliminate Sherwin-Williams, Target, Walgreens, and Lowes, stocks that many would argue are just great for a dividend-growth portfolio.
We have to go with Large Value Cap plays with Dividends to start off 2011, its better to be safe in numbers and earn a dividend while you wait out whatever may happen during the first month of the new year.
The Masters like McDonald's Corp. (NYSE:MCD), Wal-Mart Stores Inc. (NYSE:WMT), and Boeing Co. (NYSE:BA). So get your McRib on while you shop for cheap groceries at Wal-Marty then take a cheap flight on a Boeing 737 to Vegas, its what we would buy today if we had no other option.
Contrarian investors should utilize times like this to differentiate between stocks that are dropping for fundamentally sound reasons -- and those stocks that are simply being dragged down because of general market concerns. Sure, there's plenty to worry about -- gigantic federal deficits, sovereign debt problems in Europe, an economic slowdown in China. But let's not forget that in the midst of all of this volatility lies the prospect to grab some great companies at dirt cheap prices.
In particular, I'm a huge fan of dividend stocks. Renowned professor Jeremy Siegel has illustrated that from 1957 to 2003, when reinvesting dividends, the S&P's 100 highest-yielding stocks outperformed the market by an average of 3 percentage points. Over a long period of time, 3 percentage points can really add up. So if you can find dividend stocks trading cheaply, and can separate the good from the bad, you may have found yourself a real winner.
Dividend stocks provide investors with steady income but it comes at the expense of big gains. Small- and mid-cap stocks are riskier but that's justifiable as economic growth accelerates. Such was the case this year, as the Russell 2000 Index has rallied more than 25% while the S&P 500 is up 12%.
Money managers say individual investors are cashing out of bond funds and piling into equities. Some are forgoing dividend stocks to chase the performance of this year's high-flyers -- perhaps a year too late. "So many people want to hear about what's really hot," says Philip Tasho, chief investment officer of TAMRO Capital Partners. "If you're talking about the average investor, you don't want to be chasing trends. Don't just buy the latest and hottest trends. Look for the most attractive value, which is definitely large-cap dividend-paying stocks."
So if you want to invest in dividend stocks, what are your options? Here with some answers, Christopher Davis. He`s the fund analyst at Morningstar. What`s been the track record on funds that are specializing in dividend stocks? Well, recently these funds have looked a little sluggish. They didn`t rally as strongly as some other funds in the big rally last year. And this year they`ve lagged the market by a little bit. Investors have gravitated toward faster growing firms, more aggressive investments and you know dividends aren`t very sexy. They`re not aggressive so these have funds have looked a little slow.
I think that investors should necessarily chase income. Sometimes companies that pay a lot of income aren`t great companies. Investors don`t like them for a reason and so you might be investing in something that`s going to eventually run into trouble. So I would invest in funds that are run by experienced managers, great long-term records and invest in companies that have proven financial stability.
With real estate, the cash flow is taxed at ordinary tax rates as income (whatever you don’t offset with expenses). With stocks, the cash flow is taxed at long term capital gains if they are qualified dividends. On the sale of either asset, it’s short term capital gains if you’ve held it for less than a year and long term if you’ve held it for more than a year.
Here’s the big difference between the two and why I think dividend stocks trump real estate. The cost to buy and sell stock is $5 and the market is liquid, which means you can get into and out of a position within minutes. That and the stock market provides far more information than the real estate market because of sheer transaction volume and SEC reporting requirements.
Yes, dividend investing is popular. And it may become even more popular, now that Congress has extended legislation that maintains the low tax rate on corporate payouts for next year. You can find many great dividend stalwarts among the companies that have successfully paid out cash for decades.
When searching for great dividend stocks, it makes a lot of sense to start with companies that have been playing the dividend game the longest. Standard & Poor's has culled the dividend winners from the also-rans in a list it calls the "dividend aristocrats." These companies have paid and increased their dividend for at least 25 years.
What’s all the fuss over dividends? Do they really make that big of a difference? In All About Dividend Investing, 2d ed. (McGraw-Hill, 2011) Don Schreiber, Jr. and Gary E. Stroik argue that they make a huge difference. Dividend stocks are often recommended in down cycles. In the particular cycle the authors picked (or cherry-picked) $100,000 invested in the DJIA Index in 1966 would have declined to $90,275 by 1981. Had a person reinvested dividends, thereby acquiring more shares as prices were falling, the account would have been worth $186,661 in 1981.
In bull markets dividend-paying stocks may underperform the more speculative non-dividend-paying growth stocks (in 1999 the NASDAQ gained 85% while the DJIA advanced only 25%). But with dividends reinvested the return would have increased substantially. An investment of $100,000 in the DJIA in 1982 would have been worth $1,302,760 at the end of 1999; with dividends reinvested, the value would have been $2,056,109.
Investors can put together a package of dividend yielding stocks which fit their individual investing styles. For 2011, we've selected a sampler of some potent large-cap stocks which pay attractive dividends. Here are the selections and our reasons for choosing them.
We've selected a batch of stocks which have historically strong businesses and have been steady dividend payers. There are degrees of risk even in something as relatively low-risk as income stocks. The group we've selected are not necessarily the highest yielders, as those stocks often carry higher risk. Large, stable and yes, probably dull (as in unlikely to have a dividend crippling business event) is the theme for the selection of these stocks.
AT&T’s dividend hike announced Friday afternoon, prompted Standard & Poor’s Howard Silverblatt, senior index analyst to issue one of his updates on how dividend investors are faring. He says 2010 is “ending as a great year for dividends, with 2011 expected to continue good news, but we won’t be back to what we got in 2008 until 2013.”
The man we like to call the high-priest and keeper of the S&P 500 sent us this data, which we turned into a sortable table, as we know it’s often tough tracking down dividend data. The numbers reflect Thursday’s close of trading, enjoy:
Will investing in bonds be a sucker's bet in the months and years ahead? And if so, are there any ways you can protect yourself? Investors--especially retirees and pre-retirees--have been pondering these questions lately, and for good reason. After all, the conventional wisdom on asset allocation is that folks getting closer to retirement should steer ever-larger shares of their portfolios into fixed-income securities, but the math for bond investors isn't particularly compelling right now.
Current yields, historically a good predictor of bond returns, are ultralow. And the tailwind enjoyed by fixed-income investors in the past--namely, two decades' worth of declining interest rates that pushed up bond prices--is quickly receding into the rearview mirror. Rather than seeing their capital appreciate, bond-fund investors could actually see real declines in their principal values if rates head up. Fixed-income investors recently got a taste of what the future could hold, with bonds of all stripes, but especially rate-sensitive long-term Treasuries, slumping during the past month and a half
If you're one of those investors who goes for safety over risk, and wants a little income or cash flow thrown into the mix, stocks that offer high dividends might be the place for you. In fact, some investment strategists believe high-dividend stocks offer much better value right now than fixed-income alternatives.
However, investing in high dividend stocks can be tricky. You need to find a balance between a company that is doing very well financially, and will be paying dividends for the long term, but also has a high yield. Generally, the higher the dividend yield of a stock, the more risky the company is going to be. So a high dividend stock is a good investment only if the company is stable.
Many investors rely on dividend stocks to pay them regular income and provide solid growth over time. Given how many stocks don't pay a dividend at all, it's impressive for a company to be able to maintain and increase their dividend payments over time. Being able to grow steadily through good times and bad is truly a mark of success, and it takes that kind of growth to support dividend payments even during recessions and slowdowns.
In that light, one of the hallmark achievements a company can attain is to become a Dividend Aristocrat. Maintained by Standard and Poor's, the list of Dividend Aristocrats includes members of the S&P 500 that have increased their annual dividends every year for at least 25 years. In order to qualify, a stock has to meet a number of other factors as well, including minimum market cap and daily trading volume requirements. S&P recently announced its annual rebalancing of the index with McCormick (NYSE: MKC), Hormel Foods (NYSE: HRL), and Ecolab (NYSE: ECL)in and Eli Lilly (NYSE: LLY), Supervalu (NYSE: SVU), and Integrys Energy (NYSE: TEG)out.
Among the top dividend stocks that I post every month, many of the top payers are pharmaceutical companies that are in the business of doing research, inventing and then marketing drugs that will solve all types of problems. These companies typically have strong balance sheets and certainly look like very attractive dividend stocks. We decided to take a deeper look into these stocks to see if they were worth holding in a diversified dividend portfolio.
In my opinion, the conclusion is not to avoid pharma companies but rather to avoid a high concentration of pharma stocks in a dividend portfolio. Those stocks, like financials, carry their load of risk right now. They are good dividend payers and might remain so in the future. But be careful and do not include most of your stocks in this portfolio.
GE's announcement of a 17% dividend hike on top of their 20% hike earlier this year was the topic of lively discussion at our investment policy meeting on Monday. We all agreed that on the surface the news was good for GE and stocks in general, but several committee members voiced a surprising concern.
We were surprised and delighted by GE's second dividend hike, and because GE is so large and so broadly diversified across the US economy, we believe many other companies may also be experiencing better-than-expected results. The surprising concern that arose in our discussions was the possible negative implications of the dividend news. Two of us voiced the concern that because Jeffrey Immelt, GE CEO, has become so unpopular among many investors and analysts, the dividend hikes may only be his attempt to win favor with his constituents. This line of thinking didn't go far because one of the committee members reminded us that CEOs don't dictate dividend policy. That authority belongs to the board of directors.
Approximately once per month I run a high-yield momentum screen using the free service on Finviz and post the results. Returns for the last month were 3.31% including dividends (2.52% before dividends) versus 3.23% for SPY and .19% for SDY, the S&P Dividend ETF. Once again he top performing stock from last month's list was Qwest Communications (Q) returning 7.95% excluding its $.08 dividend while Pepco Holdings (POM) was the worst performing at -3.45% (excluding its $.27 dividend). The strategy has done well this year and is one I continue to track because of its promise. In recent months I have also done a variation of this strategy with the Dividend Champions list in which I only search stocks that have had a history of raising dividends for 25+ years.
The screen looks for high yielding high momentum stocks. I screen the S&P 500 for stocks yielding greater than 4% and then ranked them by 6 month returns. There were 54 results (versus 55 last month) and per a previous article (see below for explanation), the highest momentum, high yield stocks have historically been the best performing so I have listed the top 20% based on 6 month returns, or 11 stocks.
Five years ago, I began setting a little money aside each month to purchase shares selected for their dividend-paying properties. The bulk of my monthly savings would continue to be invested elsewhere, I decided -- an index-tracking ISA and a low-cost pension, for instance -- but it was time to see if dividend investing would work for me. So, five years on, I think it's time to take a look as to how I've fared, and what lessons and insights I've gleaned along the way.
I'm happy enough with the outcome: dividend-driven investing has delivered on its promise. Furthermore, the dividends that I've earned are all being reinvested, and compounding is beginning to work its financial magic. That said, I didn't see Lloyds or BP coming, and I should have seen the warning signs at BT. So there's no doubt that the credit crunch and associated recession has knocked my portfolio hard. But I'm game for another five years, for sure.
he tax compromise reached between President Obama and Congressional Republicans has a number of key provisions, but one that should be of particular interest to investors is the extension of the cap on stock dividend taxes. By extending the 15% cap on qualified dividends for two more years, the proposal could mean a boost in some firms’ dividend payouts, and a boost for dividend-paying stocks.
Still, while dividend stocks may get a boost, the tax compromise isn’t a reason to start loading up haphazardly on high-dividend stocks. After all, a hefty 6% dividend payout is little consolation if a firm struggles and its share price tumbles 30%. If you’re going to try to take advantage of a potential dividend-stock bounce, you should be sure that the stocks you’re buying also have strong fundamentals and solid balance sheets.
Hot on the heels of my recent stories about Market Beating Dividend Stocks, analysts at Bank of America-Merrill Lynch have released a sector update on Australian Infrastructure stocks, and the similarities between my own research and theirs is too much to leave unmentioned. The team at BA-ML has picked three candidates that each should generate a return of some 15% annually from a combination of high dividends and relatively steady growth over the years (plural) ahead.
This seems like a brave call given this type of stock tends not to perform very well when interest rates are rising, and don't we all know the RBA is not finished yet? Also, with more and more market strategists projecting 20% returns in the year ahead from global growth leveraged cyclicals and resources stocks, who'd be genuinely interested in defensive exposure with 15% tops in projected return? In other words... the ideal environment for astute, patient investors to pick the next Market Beating Dividend Payer, while Mr Market is looking in the direction of China and the US dollar.
With record cash in corporate coffers, investors have been egging on corporate management teams to return value to shareholders in the form of dividend checks -- and a growing number of companies are listening. Over the last 36 years, dividend stocks outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, according to a study from National Data Research.
Dividend investing is "a sustainable strategy that will be a key driver for performance and total return in 2011," said Lawrence Glazer, Managing Partner with Mayflower Advisors, in a recent appearance on CNBC. Glazer encouraged investors to reconsider top dividend-paying "Dogs of the Dow" such as Verizon(VZ), Johnson & Johnson(JNJ), Merck(MRK) and Kraft Foods(KFT), blue chips that have offered decades of dividend increases and sustainable payouts, many with stronger yields than 10-year treasury notes. Verizon, which recently increased its quarterly dividend by 2.6% to 48.75 cents per share, offers an annualized dividend yield of around 5.73%; Johnson & Johnson 3.49%, Merck 4.22% and Kraft 3.77%.
Investors can increase their passive income by buying dividend paying stocks with a safe yield. The Top Dividend stocks have been steadily increasing their dividends for years while maintaining solid earnings growth and cash flow. Safe high yield stocks are in demand. With an uncertain investing climate, stock traders are looking for companies to invest in that pay strong and safe dividends.
“We believe that high growth high yield dividend stocks with a proven track record of paying dividends to shareholders are a solid investment in any market.” – Alexander Ramsay, DSO. Solid dividend stocks are not easy to find. Just about every investment show on television has guests on that recommend stocks that pay dividends. Viewers take their advice and go out looking for these high yield guarantee’s but end up being faced with a large number of unfamiliar choices. It leaves the average investor asking “which stock is right for me?”
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as being eaten by bees. Looking out a bit further — say, 2013 — inflation may become a worry. But not before then. Still, it's good to be prepared, and if you think soaring prices may smack your portfolio, build one devoted to whipping inflation eventually.
Dividend-paying stocks. Most companies would welcome a chance to raise prices. When they can, dividend-paying companies will be able to increase their dividends. One good place to look for dividend-paying stocks is Standard & Poor's Dividend Aristocrats. These companies have raised their dividends every year for at least 25 years. High-quality dividend-paying stocks are the usual hunting grounds for equity-income funds.
When the stock market collapsed in 2008 and 2009 it seemed that the carnage was indiscriminate. Most stocks' correlations went to nearly 1.0 and it seemed there was nowhere to hide. But it pays to dig deeper and look at companies that held up well during the worst downturn since the Great Depression. It turns out that many of these companies have stable growth, low debt, and relatively high dividends.
There are several interesting things to note here. First, the companies generally produce things that people need or use as staple items such as food, energy, household products, basic clothing and pharmaceuticals. Second, these are well established, stable cash flow companies. Third, relative to their peers in the S&P 500 these companies have low levels of debt. And lastly, these companies have higher dividend yields than their peers.
Today, newly minted advisor of Fool U.K.'s Dividend Edge service Todd Wenning shares two dividend-paying companies on his watchlist, and one that you should buy today. The dividend-lover in Todd loves the moment when a company realizes it's no longer a tech darling, a daring and dashing growth company. The moment it realizes it is a mature company is usually when it really commits to its dividend.
Intel (Nasdaq: INTC) is there. The world's largest semiconductor chip maker has seen its share price drop more than 15% over the past five years thanks to low-cost competitors in Asia and currently trades at one of the lowest valuation multiples ever: 11 times forward earnings with a 3% dividend. Todd anticipates Intel will roll some of its ample cash flow toward boosting that yield. And, as leading academic Jeremy Siegel writes in his The Future for Investors, with 97% of the real returns coming from dividends rather than capital growth, Todd believes he's found a long-term winner.
Many investors could benefit from a sleep-well-at-night stock or two, and Northeast Utilities (NU), first discussed here on May 5, 2009 at a price of $21.48, fits the bill. Northeast's proposed merger with NStar (NST) should close in the second half of 2011, and create one of the largest utility companies in the U.S. The deal should be accretive to earnings in 2011.
The new, larger company will take the Northeast Utilities name, and will own six regulated gas and electric utilities operations in New England, primarily in Connecticut, Massachusetts and New Hampshire, serving 3.5 million customers. The combined company will pay an annual dividend of $1.60, up from NU's current $1.02 annual dividend.
With the recent market rally, a lot of dividends have been diluted due to price appreciation, so the best strategy going forward is to watch these stocks and wait for a pullback in the ones that you are targeting specifically before putting any capital to work. On a side note, I would say this particular stock screen elicits a lot of controversy about the quality of the dividends, and whether they are dependable.
I realize that not all of these companies are going to be able to keep the high dividend that they are paying out - I'm just trying to give you some ideas for you to generate fixed incomes in a bad economy. I can tell you this though, stocks such as NLY are fairly good divi-plays and make for a great covered-call strategy.
To make the cut onto the Standard & Poor’s Dividend Aristocrats Index a company has to have paid a dividend every year for at least 25 consecutive years. The index includes at least 40 stocks and is rebalanced every year in December. S&P reported that the Dividend Aristocrats posted an annualized dividend yield of 2.9% in 2009, compared with a yield of 2.01% for the S&P 500 Index. But MarketWatch notes that the Dividend Aristocrats gained an average of just $0.02 from late Monday to Wednesday’s close. That’s a gain of just 0.004%, compared with a gain of 0.4% in the S&P 500.
The proposed tax bill agreed to by President Obama and Republican legislators on Monday extends the 15% tax rate on dividends, but apparently that wasn’t enough to light a fire under the Aristocrats. The performance of individual companies gets part of the blame for the weak showing. The other part of the blame goes to the temporary nature of the tax deal. In two years, the dividend tax rate could change again. Uncertainty is the bane of a dividend investor’s life.
Robert Millen, co-portfolio manager of the Jensen Portfolio at Jensen Investment Management, and David Joy, chief market strategist at Columbia Management, shared their best plays. “We like companies that are very entrenched competitively, have global franchise, generate lots of cash and use the cash to make acquisitions, buy back shares and pay a dividend,” Millen told CNBC. “And we think dividends may play a bigger part of return going forward in the next 10 years.”
In the meantime, Joy said dividend stocks are much more attractive compared to bonds, and also act as an incentive for getting retail investors back into the market. “They’ve been scared away by the two downturns in the last 10 years and the certainty of a dividend yield may be the key to get them back in again,” he explained. “We like the equity markets for next year.”
"The bond apocalypse is upon us," Cramer told viewers. He said with bond prices beginning to free fall, the loss of principal will become more than the interest gained. "Bonds can hurt you," said Cramer, as he advocated better alternatives. High-yielding dividend stocks is the place investors need to be, said Cramer. Almost 40% of the total return in the S&P 500 has been in the form of dividends, leaving a lot of money on the table for investors who are not participating. That's why Cramer said investors need to move their money, even retirement savings, out of bonds and into dividend stocks.
To illustrate his point, Cramer returned to his dividend portfolio from March 7, a group of five stocks up an average of 15.9% since their debut. Add dividends however, and that gain grows to 19.7% during a time when the S&P 500 was up just 11.9% and U.S. treasuries paid a paltry 4.2%. Cramer said a 4% yield is the minimum benchmark investors should be looking for.
Dividend-paying stocks are often seen as being higher-quality and stabler than their non-dividend-paying counterparts. Thus, they can be viewed as the next step up on the risk/return spectrum between lower-risk bonds and higher-risk stocks. But there is a point at which dividend-paying stocks actually become riskier than the average stock. Dividends have historically accounted for 40% of the returns from investing in stocks, and despite conventional wisdom, high-dividend-payout companies tend to have stronger earnings growth. So the case for investing in companies that pay dividends is a strong one.
It seems that a logical way to achieve a high yield on a dividend fund would be to weight stocks by their dividend yield, so that high-yielding stocks would make up a larger percentage of the fund. But unfortunately, it does not follow that if dividends are good, a higher dividend yield must be better. The fact is that this approach does nothing to screen out the low-quality, risky companies that are likely to cut their dividends in the future, or even file for bankruptcy.
Many investors are lapping on to stocks where the dividend payout is good even though the valuations are expensive. But this may not be such a wise move. We believe that investors need to look at dividend yield of companies while investing in their stocks. Dividend yield is nothing but the company's dividend per share divided by its stock price. Thus, even if the dividend paid out is good, if the stock price is very high, the yield will not be that great.
At the end of the day, when investing in equity markets, an investor has to look at two factors. One is the benefits of capital appreciation. The other is the dividend yield. The two combined would constitute the total return that would accrue to an investor. And this return will not be strong, if the stock price of any company is disproportionately high. Thus, strong corporate governance, good growth prospects and a healthy dividend policy are certainly prerequisites for investing in equities. But always keep an eye on valuations too.
Investors are turning to stocks that offer high dividend yields such as ITC and Castrol despite steeper valuations. This trend is due to skepticism towards mid-cap shares on increasing scandals such as price rigging. Large-cap stocks are outperforming on the perception that chances of corporate misgovernance issues are fewer than smaller players, where a few traders rig up stocks in collusion with promoters.
The investment strategy may not give steep returns in the short term, but offers safety and steady returns over the years as they pay high dividends. Dividend income is tax-free in the hands of shareholders. “Investors are on the hunt for fundamentally good companies where there is a visible earnings growth and that offer attractive dividend yields too,” said Pritesh Vora, director-India of US-based Equanum Advisors.
The importance of investing in dividend stocks has been outlined and documented for decades. Those who have been fortunate enough to heed dividend-oriented advice have been able to grow and preserve their wealth for years on end.Today, with Treasuries and interest rates at all-time lows, it's as important as ever to consider dividends essential to any portfolio. That's why I've taken the time to provide you with the 42 most promising and stable dividend stocks, and used my own criteria to offer you the world's best dividend play.
I screened the Aristocrats list for stocks that had the largest yields, the highest five-year growth rates, and the lowest payout ratios. The stock I chose from this even more select group, while it may shock you, is what I now consider the world's best dividend stock. And the winner is .... McDonald's a blue-chip stalwart that you can count on, in both bull and bear markets. The company has one of the most prestigious brand names in the world, estimated to be worth about $33.5 billion, according to Interbrand.
Yes, dividend investing is popular. And it may become more popular if Congress extends legislation that maintains the low tax rate on corporate payouts for next year and beyond. A great place to look for dividend stalwarts is among those companies that have successfully paid out cash for decades.
The authoritative list of Dividend Champions is compiled by the DRiP Investing Resource Center annually and features those companies that have increased dividends for more than 25 years straight. The latest list details about 100 companies that have met the center's criteria, and these companies need not be part of the S&P 500 in order to qualify, unlike the Dividend Aristocrats index. So you won't see all the usual large- and mid-cap names that usually dominate such lists.
It would be surprising if the public (at least as many of them as can be persuaded) wasn't enticed back into the stock market in 2011. The public has been stuck in neutral for almost two years in low-yielding money market and Treasury funds. They're earning next to nothing on their money and are growing tired of it. They're seeing the attractive yields being offered on many stocks and analysts and stock promoters have been pushing the yield story for some time. Investors are starting to emerge from the bunkers in the pursuit of these attractive yields.
Back in October, Barron's Tom Sullivan observed that with interest rates currently near multi-decade lows, investors can do nearly as well keeping their money under the mattresses as opposed to money funds. Not long ago a 30-day taxable money market fund offered an average yield of just 0.04%. "Little wonder," wrote, "Sullivan, "investors on balance have pulled $1 trillion out of them since the beginning of 2009." This was just one of a growing number of articles appearing in the financial press which highlight the paucity of income potential in money market funds. At the same time, writers and analysts are pushing the idea of buying stocks with attractive yields as an alternative to low-yielding money funds.
Morningstar's Josh Peters on recent market volatility, dividend-stock valuations, and some dividend-payers that have come through in tough times. For the short-term trader, a rising market certainly gives you an opportunity to score some quick gains, but for the long-term investor who perhaps is adding additional money over time or even just reinvesting his or her dividends, higher prices are not necessarily going to improve your long-run result. The way I like to think of it, calls back to some studies that Jeremy Siegel had done, which showed that 97% of the total long-term return from stocks, the real return after inflation, had come from reinvesting dividends.
If you’re looking to protect and grow your nest egg in this uncertain market, your best course of action is to buy stable blue chips without major competitors and with hefty dividend yields. The durable, easy to use and reliable formula I advise for investors has been my working model for nearly five decades.
It also has been the basis for my Intelligence Report “Retirement Compounders” model portfolio since 2003 — and a reason I’ve beat the market seven years in a row. Some investors attend analyst meetings, pour over quarterly reviews or calculate company earnings projections. But if you’re a conservative investor looking for a bedrock investment with a good dividend, you should focus on my retirement compounders.
For nearly two years, money has flowed into assets that are polar opposites: At one end of the spectrum, investors have been attracted to small company stocks and tech stocks, which offer the prospect of high capital appreciation as long as we experience robust economic growth. At the other end, bonds provide regular income and investors have snapped them up as protection against continued economic sluggishness, or worse.But why settle for either/or when you can have both growth and income?
Financially strong blue-chip companies offer consistent earnings growth, and their reasonably priced shares are pay hefty dividend yields. “Dividend stocks seem to be some of the most compelling buys around,” said Hans Olsen, chief investment officer of J.P. Morgan’s Private Wealth Management business. “I think what you’re seeing is people falling out of love with equities right now and the uncertainty that investors have with the type of environment we’re in. Despite strong corporate profits and strong balance sheets, people seem to have turned their backs on equities [in favor of] what they think is a sure return in bonds.”
When the stock market collapsed in 2008 and 2009, it seemed that the carnage was indiscriminate. Most stocks’ correlations went to nearly 1.0 and it seemed there was nowhere to hide. But it pays to dig deeper and look at companies that held up well during the worst downturn since the Great Depression. It turns out that many of these companies have stable growth, low debt, and relatively high dividends.
The collapse in the stock market and economy that occurred in 2008 was due to the massive credit bubble bursting. Companies with high debt loads were rightfully punished by the markets. Only a whole host of bailouts and Federal Reserve programs saved many of these debt-laden companies. Most of these companies (and our government) are now even more leveraged than before. If and when the next credit-related downturn occurs, you can feel much safer in [low-debt] stocks and collect your nice dividend checks along the way.
DWS Investments, the US retail unit of Deutsche Bank's Asset Management division, today announced a change in name and strategy for the DWS Europe Equity Fund. With shareholder and Board of Directors approval, the fund has been renamed the DWS World Dividend Fund (SERAX). The Fund will reflect two significant changes to its investment strategy: (1) a change in objective from growth with a focus on European common stocks, to a total return strategy with a focus on global high-dividend stocks; and (2) a change of benchmark from the MSCI Europe Index to the MSCI World High Dividend Yield Index.
Under the new investment strategy, the DWS World Dividend Fund will focus on total return emphasizing both current income and capital appreciation. The fund will invest at least 80% of net assets in companies across the globe with high dividends payouts and the opportunity for further dividend growth. The underlying goal is to help investors maintain a certain cash flow, while attempting to remove duration bond risk from their portfolios and improve long-term growth potential.
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