Dividend Investors Are Willing to Pay More For a Bird in The Hand

A simple look at the three different investment strategies reveals that investors have been willing to pay up for higher yielding stocks. What are we to glean from these data? The obvious and most simple answer is that in this very low interest rate environment (10-year US Treasury Bonds are yielding under 2.0%), investors have been willing to pay up for higher dividend yield, while dividend growth is being discounted, if not ignored.

While the data clearly show the attraction of high dividend yields, history reveals that over longer periods companies with higher dividend growth normally outperform slower growing companies. In short, companies that can increase their dividends at low to mid-double digit rates fall in and out of favor, but the long-term trend line of their total return growth is higher than the trend growth of slower growing companies.

Source: Rising Dividend Iinvesting

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