Dividends used to be some boring little sideshow that only retirees paid any attention to. Most stock investors would purchase companies for capital gains, not dividends. The objective used to be to buy a stock low, sell it high, and pocket the difference as a capital gain, which in most locales enjoys tax discounts over dividends. But when interest rates were cut to all-time lows in late 2008 at the onset of the worst economic crisis in a generation, the investment climate changed. Stocks weren’t appreciating. You could be holding on to a stock for years and earning capital losses rather than gains.
In such a stagnant environment, dividends grew increasingly more valuable, as investors could at least collect something for the time their investments were tied up. The chase after yield was on, as more and more portfolio managers and self-directed investors saw the importance of collecting regular cash payouts which could deliver as much 4 or 5% per year – not bad when interest rates on bonds are still at historic lows below 3 and even 2%. Yet now that stock markets have been on the rise again, dividends are not being pushed into the background where they once were. Investors have come to appreciate the value of dividend disbursements in augmenting portfolio returns, especially during those frequent stock market pullbacks and still persistent below average bond returns.
Source: Wealth Daily
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Posted by D4L | Tuesday, November 26, 2013 | ArticleLinks | 0 comments »________________________________________________________________
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