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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