The Golden Age of Dividend Investing Is Dead

I've often described dividend stocks as the heart and soul of nearly every successful retirement-focused portfolio. Unfortunately, I've also come to terms with the idea that the golden age of dividends is officially dead. Dividends serve multiple purposes for investors. The most obvious is that they provide shareholders with extra cash that they can either pocket to boost their immediate income or reinvest with the intent of compounding their gains (and dividends) over the long term.

For the Silent Generation and baby boomers, a healthy dividend payment was the expectation. Historic dividend payout ratios (the percentage of profits paid out in the form of a dividend) between 1923 and the mid-1990s regularly hovered between 40% and 65% for S&P 500 companies. Understandably, there have been fluctuations in these payout percentages, as recessions can lead to periods in which payouts are artificially high as corporate profits rapidly fall. During the Great Depression and Great Recession, for example, payouts ratios crossed 125% and 90%, respectively. But since the mid-1990s, investors have witnessed a new norm: an average dividend payout ratio for S&P 500 companies near 30%.

Source: Motley Fool

Related Articles:
- Dividend Investors Should Focus On Stocks, Not The Market
- The Secret Ingredient of Dividend Growth Stocks
- Stocks Providing Positive Feedback With Increased Dividends
- Dividend Growth Stocks With A Defined-Benefit Pension
- 7 Higher-Yielding Stocks With A Low Price To Book