Does the old adage "A bird in the hand is worth two in the bush" apply to investments? When it comes to stocks that pay dividends vs. those that don't, the answer is yes. According to Standard & Poor's, dividend-paying stocks in the S&P 500 outpaced the nonpayers in the benchmark index by 1.63% compounded annually from the end of 1979 through July 2010.
The stocks that pay dividends also tend to be less volatile. "They don't go up as much in the good times and they don't go down as much in the bad times," said Howard Silverblatt, senior index analyst at S&P. "The trick is to find a dividend that's safe," Silverblatt said. One way to do so is to look at companies whose profits are at least twice what they pay in dividends. Silverblatt said that 76 companies in the S&P 500 fit that description and yield more than the 10-year Treasury note, which yields 2.64%.
Source: Daily News
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