“Follow the Juicy Dividends.” That’s what “Businessweek” columnist Gene Marcial advocates in his February 23 “Inside Wall Street” column (Sorry I can’t find the link). In the article he points out that investing for dividends alone has not shown to be a superior investment strategy. He cites research from the Ned Davis organization that shows that it’s not just dividends; it’s rising dividends that matter.
In this regard, we are in complete agreement with the article. Our research and experience over the years has convinced us that rising dividends from financially strong companies is not only a winning combination in the good times, but a solid bulwark in tough times like those we are going through now. Of course rising dividend stocks fall in the bad times, but they don’t go down as much, and they are among the first to recover.
Mr. Marcial cites Ned Davis research that every investor should note: “. . . companies that have increased dividends for at least five years beat the market in every year from 1972 to 2008." During that time, the dividend growers produced a total rate of return of 8.9% while the S&P 500 Index grew by only 6.2%. As an aside, companies that maintained a fairly steady dividend grew at 6.3%.
Rising Dividends matter and the key to success is not just focusing on companies that pay dividends, but on companies that have a history of increasing their dividends. The final filter is to analyse current financial results to assure that future dividend hikes are probable. There will always be surprises, but if you can keep the companies that stop increasing their dividends to a minimum, your portfolio will still do well.
Thursday, February 19, 2009
Rising Dividends Matter: Mr. Marcial Makes His Case . . . And Ours
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5 comments:
Yes, because companies can 'lie' with earnings. Maybe not forever but for a significant amount of time. Surely we learned that much from the tech bubble of the late 90's. There is no single more reliable signal that a company is really making money than a divedend and no stronger signal that it is growing than a rising dividend.
But enough of that, what we want to know is will the Obama administration turn us into a banana republic, are we to become the United States of Argentina.
SR
Here's the link.
Best Wishes,
D4L
I couldn't agree more.
Even as naive as I am sometimes in discussing economic theory, developing investment theory or in following the crowd, I do understand that dividends are real money and rising dividends suggest underlying health in a company.
I am not so naive to believe that many of these companies are worth their current market value. Even if the stock goes to zero, unless we head back to the caves and live as hunter gatherers many of these companies have underlying strength and will see better valuations in the future.
I also do not believe that the goovernment spending our tax dollars as outlined is really the answer to the problem.
If they really want the tax dollars to do some good work buy the dividend paying stocks and support the companies that supply the jobs.
A strong market will actually lead the way out of this morass.
Obama and his "golden economic team" should listen to those on the street and not so much to the heads of the major companies and the people that have gotten us here.
LISTEN UP BARACH, and start thinking about the burden you are placing on the future, think about the amount of waste in the $783 billion dollars and dvelop the plan that will solidify the future.
Follow the rising dividends
This is Very good site! :)
I like this Article!
Johnny
http://www.investingforexclub.blogspot.com/
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