Stocks for the Dividend Craze

In the 0% interest-rate world of Ben Bernanke, the 3% dividend yield is king. When a two-year Treasury note yields 0.22% and a two-year CD pays 0.85%, it's not surprising that savers and investors are eager to snap up anything with a higher yield. That's got an upside—stocks that pay 3% or more have shown big gains in price as dividend-hungry investors have bought the shares. Intel (INTC), for example, which paid a 3% dividend at the end of 2010, returned 19.03% in 2011 (combining price appreciation and dividends.)

At its January 25 meeting, the Federal Reserve's Open Market Committee said it would keep short-term interest rates at their current exceptionally low levels—I guess 0% counts as exceptionally low—until the end of 2014. That's a big extension of the Fed's previous guidance for interest rates at this level until mid-2013. That's not a problem for investors who already own shares. They locked in their yields when they bought. But it is a problem for investors with new money, as yesterday's high-dividend stock turns into tomorrow's stock with a mediocre yield.

Source: Money Show

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