A Popping Dividend Bubble Is Great News

Posted by D4L | Monday, February 20, 2012 | | 0 comments »

Last week, our award-winning columnist Morgan Housel penned a piece exploring the possibility of a dividend bubble. "Just as investors ran blindly into subprime bonds five years ago in search of yield, they're running blindly, carelessly into dividend stocks today," says Housel. I don't disagree with him on that. In the aftermath of the recession and in such a low-interest-rate environment, dividend stocks have been all the rage.

But Housel's conclusion is this: "The more I look, the more it becomes apparent that stocks known for their dividends trade at unfortunate valuations that could leave investors disappointed." In the short to medium term, he's probably right. But if you're investing with a decades-long time horizon, I think this could be the best news you could hear. The power of holding dividend stocks when prices are depressed -- you simply accumulate more and more shares than you otherwise would.

Source: Daily Finance

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