The Great Dividend Hunt

Stocks that pay dividends have been hot lately. But despite the recent rally—the Dow Jones U.S. Dividend 100 Index is up 10% so far this year—there still are some decent opportunities, especially for investors willing to think globally. One factor driving the boom: Investors now earn paltry rates on bonds and certificates of deposit. The Standard & Poor's 500-stock index, by contrast, carries a yield of about 2.2%, and many stocks pay considerably more. (Yields, which fall as prices rise, are the annual payout as a percentage of a stock's price.)

It might be tempting to think the trend has run its course. Among household-name dividend stocks, utility American Electric Power AEP +0.16% is up 21% from a year ago, tobacco giant Altria Group MO -1.35% has shot up 28%, and pharmaceuticals company Pfizer PFE -0.36% has jumped 45%. But while dividend-stock prices have been rising, so have payouts. "Dividends have had a fantastic year and a half," says Howard Silverblatt, senior analyst at S&P. Overall, payouts are up 16% so far this year, as companies hand back more of their rising earnings. The third quarter saw record dividend payouts, he says, "and we expect the fourth quarter to beat that."

Source: Wall Street Journal

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