Stingy Investor Contact - Subscribe - Login
  Home | Articles | Links | SNW
 
Article Archive: Dividends

The case for and against dividend ETFs
03/03/24   Dividends
"Unlike stock prices, which move based on the whims of market participants, dividends are set by company management and have been far more stable than prices historically. My favorite example of this comes from The Great Depression where monthly prices declined by nearly 90% (from peak to trough) but dividends weren't even cut in half."

Volatility, dividend yield and stock returns
12/29/23   Dividends
"We show the out-performance of dividend yield amongst payers arises, in part, because anomalies earn lower returns in payers than non-payers, and this is true even among strategies constructed on payout. So for investors interested in concentrating their portfolios in the mature companies that tend to pay dividends, dividend yield is a valuable investment signal"

Dividend impact on stock returns
02/05/23   Dividends
"As shown in the table above, without controlling for the factor exposures, while the dividend payers had lower monthly returns (1.06% vs. 1.09%), the significantly higher monthly volatility of the non-payers (6.42% vs. 4.23%) resulted in the dividend payers having a higher annualized compound return (12.25% vs. 11.10%)."

Dividends and buybacks
01/01/23   Dividends
"the combined yield from both is close to 5%"

Dividend growers to manage volatility
08/07/22   Dividends
"Notice that performance of the dividend growers nearly matches the return of the Russell 1000 Index. However, volatility is 2.4% per year lower. Said another way, the ride to achieve a similar return has fewer twists and turns."

Dividend charts
01/16/22   Dividends
"When you look at the long-term cash dividends on the S&P 500 going back to the inception of the index in 1957, inflation has averaged 3.6% but cash dividends have provided real growth on top of inflation."

Put down the dividends
07/19/21   Dividends
"Ok, I'll admit that the title of this article is a little aggressive. That is especially true when you consider the fact that I don't think investing in high yield stocks is a bad investment strategy. In fact, academic research shows that it is a reasonable one."

Dividends power the wealth effect
01/10/21   Dividends
"if politicians sought to exploit the wealth effect the data would suggest that they encourage firms to increase their dividend distributions as much as possible."

A good source of income
05/23/20   Dividends
"Stocks may be one of the best sources of income of any asset class. And that income may be more important than ever with bond yields on the floor."

Dividends and inflation
04/24/20   Dividends
"Relative to market prices and earnings, dividends have been the least volatile and exhibited the strongest correlations with inflation"

Dividend downturns
11/22/19   Dividends
"There is a lot to like about dividend-paying stocks. Dividends generally follow earnings, and are cold hard evidence of earnings. existence. In Canada, this infatuation with dividend-payers is compounded by our love of bank and utility stocks, and favourable tax treatment of dividends paid by Canadian companies. Many Canadians view dividend-paying stocks as an investment cure-all - e.g., replacements for low-yielding bonds, and protection from a bear market or rising interest rates. And while they can sometimes deliver, history shows that the expected protection is far from certain."

Consuming dividends
11/08/19   Dividends
"This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly to anticipated income. We combine administrative bank data linking customers' categorized consumption transactions and income to detailed portfolio and trading data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income and age distributions increase spending precisely around dividend receipt. Importantly, we find that consumption responses are driven by financially sophisticated investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of 'planned' excess sensitivity."

Cash back
11/03/19   Dividends
"We look around us and imagine that today's largest corporations will always be with us, but that simply isn't the case. That brings me to my second key point: We should want companies to return cash to shareholders - and preferably lots of it."

Dividends can lie
10/22/19   Dividends
"Don't get me wrong, I love dividends. I even have a money management strategy based off of them. But I know that dividends are more fickle than most of their fans admit. The infatuation that some money managers have with dividends is misplaced. To say that 'Dividends don't lie,' is an overstatement. Yes, the check will clear, and you get money, but that does not mean that the next dividend will get paid."

Dividends fade
04/12/19   Dividends
"In the past, dividends were the only reason investors placed their money in equities. Now, dividends play a much smaller role, for better or worse, in the overall stock market."

Dividend yield vs dividend growth
09/10/18   Dividends
"Our research confirms that investors should focus on dividend yield rather than dividend growth rates."

Avoid dividends
10/30/17   Dividends
"Many investors, including retirees, value those quarterly dividend checks. But recognize the huge opportunity cost ones pays for them. The 'bird in the hand,' so to speak, is costing about three or four in the bush."

The dividend growth myth
04/30/17   Dividends
"Now, with its updated return calculations, Ned Davis shows dividend growers returning 12.89%, all dividend stocks 12.83%, and equal weight S&P 500 12.35%! (All beginning in 1973.) So, an entire generation of funds was sold on the premise of dividend growth outperformance. The problem is it's misleading because it doesn't tell the whole story."

Dividend policy
02/12/17   Dividends
"The shift is remarkable. In 1988, almost 70% of all cash returned to stockholders took the form of dividends and by 2016, close to 60% of all cash returned took the form of buybacks."

Is dividend investing dangerous?
12/11/16   Dividends
"Even a fairly vanilla investment strategy, like dividend investing, is not without its critics. There is a significant amount of evidence that dividend strategies - including focusing on dividend payers, dividend growers, or high yielding stocks - have historically generated excess return."

Dividend stock downside
03/20/16   Dividends
"I had started with a hypothesis: by avoiding dividends might we actually improve 'dividend investing'? But by removing the dividend, it inadvertently refocused the selection methodology on pure value. My research turned out to be a backdoor way of reminding myself that value investing and dividend investing - while often confused as the same thing - are actually distinct strategies. And more times than not, value wins out."

How to beat the S&P 500 index
03/19/16   Dividends
"From 1991 until 2016, his strategy gained an average compound return of 12.76 percent per year. In a tax deferred account (not including transaction costs) it would have turned $10,000 into $201,315. Investors in Vanguard.s S&P 500 Index (VFINX) would have averaged a compound annual return of 9.7 percent per year. The same $10,000 would have grown to $101,265."

Dividend yield a value factor?
07/31/15   Dividends
"Prior to the financial crisis bottom (pre-2009), the higher yielders were cheaper than the next bucket (2-4% yield) 92% of the time. Since 2009, they've only been cheaper 30% of the time."

Dogs of The Footsie
01/18/15   Dividends
"The dogs are also well ahead over the past 13 years, growing by an average annual 16.3 per cent in total return terms, two-and-a-half times the 6.5 per cent total return figure for the index."

The power of share repurchases
06/29/14   Dividends
"One of the most effective stock selection strategies in the U.S. over the past several decades has been to buy stocks that are in the midst of repurchasing significant quantities of their shares-but just blindly following buybacks isn't always the best strategy. While many companies that are repurchasing large quantities of their shares make for great investments, others are dangerous and should be avoided."

Disbursing cash to shareholders
05/18/14   Dividends
"Frequently asked questions about buybacks and dividends"

Enhancing yield-based strategies
05/18/14   Dividends
"High dividend yield stocks do not reliably earn above-average risk-adjusted returns. More complete measures of shareholder yield, which account for net share repurchases, perform better. We explore the use of net-debt paydown as a way to further enhance shareholder yield. The addition of net-debt paydown enhances risk-adjusted returns and creates a shareholder yield metric that is more robust over time. We also explore the technique of separating yield metrics by payout percentage as a way to enhance return predictability. We find some evidence that using payout percentage within a yield category can systematically improve portfolio performance."

The high dividend yield return advantage
04/20/13   Dividends
"In the pages that follow, we set forth a number of studies, largely from academia, analyzing the importance of dividends, and the association of high dividend yields with attractive investment returns over long measurement periods. You may be familiar with our prior booklet, What Has Worked In Investing, where we provided an anthology of studies which empirically identified a return advantage for value-oriented investment characteristics. In the same spirit, we attempt to examine what some in our industry have referred to as the "yield effect"; i.e., the correlation of high dividend yields to attractive rates of return over long measurement periods. Much has been written about dividends, and what is contained herein is not meant to be an exhaustive analysis, but rather a sampling of studies examining the impact of dividends on investment returns. We hope it will provide you with added insight and confidence, as it did us, in pursuing a yield-oriented investment strategy."

A value tilt in disguise?
04/20/13   Dividends
"The yield factor associated with high-dividend-yielding stocks actually detracted from performance."

You do the math
10/13/12   Dividends
"One of the nice things about dividends is that they're taxed at a lower rate than interest or other income. Most people know that. What they may not know is that, depending on the province, it's possible for an individual with no other sources of income to earn nearly $50,000 in dividends without paying any tax at all."

Dissecting shareholder yield
05/23/12   Dividends
"We study a variety of previously examined payout yields over time: dividends, share repurchases cash flow, and equity issuance. We confirm on a newer dataset what other research has found dividend yield no longer works, but more complete measures of shareholder yield hold promise. We contribute to the literature by examining an additional variable to payout yield, net debt pay down. The addition of net debt pay down helps performance, but is not a panacea. We find that regardless of the yield metric chosen, the predictive power of separating stocks into high and low yield portfolios has lost considerable power in the last twenty years. We also explore the concept of separating yield metrics by payout percentage as a way to salvage the predictability of yield metrics. We find no evidence that using payout percentage within a yield category can systematically improve portfolio performance."

The dividend-fund dilemma
04/08/12   Dividends
"Sooner or later, the markets always punish investors who do the right thing for the wrong reason. Some investors in dividend-oriented stock funds might end up learning that lesson the hard way."

Dogs bite back
11/26/11   Dividends
"The Dogs of the Dow are running strong this year. The decades-old strategy, which calls for buying the 10 highest-yielding shares among the 30 Dow Jones Industrial Average members at the end of each year, has returned 5.5% this year through Wednesday, versus a 0.4% decline for the broader Dow."

Dividends: collect, reinvest, repeat
09/14/11   Dividends
"The market storm of the past few months has produced a bright side: dividend yields are on the rise."

Dividend growth stars
06/25/11   Dividends
"Using data going back to 1992, CPMS created annual portfolios of all TSX-listed stocks that increased their dividend over the previous year. The annualized return through 2010 was 13.9 per cent, compared to 9.7 per cent for the S&P/TSX composite total return index."

Unlocking cash hoards
05/28/11   Dividends
"There is a cash crisis in corporate America - although it comes not from a shortage of the stuff, but from a surplus."

Curb your enthusiasm
03/26/11   Dividends
"If you want to drive today's investors mad with desire, try this magic word: dividends. There's something about the promise of a high yield that makes grey-haired stock buyers turn giddy as 17-year-olds. It's not entirely clear what gives rise to this intoxicating effect. Stock market historians say dividend-paying stocks have generally done better than their non-dividend-paying peers, perhaps because being forced to disgorge cash on a regular basis pushes executives to focus on their core business rather than lavishing money on the CEO's pet projects. But paying a dividend, by itself, doesn't guarantee a company success."

Dogs could have their day in 2011
12/29/10   Dividends
"Michael O'Higgins is the first to admit that the Dogs of the Dow strategy has fallen on hard times as a stock-picking technique. "I'd say it's very unpopular right now," he said. "In the investment world, if something hasn't worked for a year or two, they damn it.""

Dividends reign as market pours
06/13/10   Dividends
"But layered against the dourness, earnings have been strong, cash positions are growing and interest rates are extremely low, making other investments look relatively more attractive than bonds and cash."

They're clipping your dividends
04/15/10   Dividends
"Come next January the favorable 15% rate on dividends will expire, making them subject to taxation as "ordinary income." At the same time the maximum rate is kicking up from 35% to 39.6%. The third thing that will happen in 2011 is the resurrection of a rule that ostensibly limits deductions but for the majority of taxpayers is nothing but a boost in their tax bracket. This rule adds 1.2 percentage points to your rate. In 2013 comes a fourth tax increase: a 3.8% surtax on investment income. Add it up. Dividends that used to be taxed at 15% are set to be taxed at 44.6%."

You should get a bigger slice of earnings
03/14/10   Dividends
"No investor can be certain that a company will be able to keep creating value in the future. Often, however, you can be sure that a company can safely distribute value in the present. It is high time for companies to cut shareholders a bigger slice of the pie."

Loosen up, tightwads!
02/01/10   Dividends
"Many big companies with the financial wherewithal to pay dividends are being stingy about payouts -- for no good reason. By hoarding cash, the likes of Apple, Google, Cisco, Amazon, eBay, IBM and Amgen are doing their shareholders a disservice -- and it's time for that to change."

Dividend growth lives
12/16/09   Dividends
"Still need convincing that dividend growth stocks, and utilities in particular, deserve a place in a well-diversified portfolio? In his December investment outlook, Pacific Investment Management Co.'s Bill Gross - manager of the world's biggest bond fund - urged investors to move money out of ultra-low-yielding savings accounts and money market funds and into utilities stocks. Utilities are reasonably priced, and "their growth in earnings should mimic the U.S. economy as they always have, and most importantly, they yield 5 to 6 per cent, not .01 per cent," he wrote."

Select dividend club
12/14/09   Dividends
"Canada's most exclusive dividend club just got a whole lot smaller. After a year in which some high-profile companies slashed their dividends and many others failed to increase their payments as they dug in for the recession, the S&P/TSX Canadian Dividend Aristocrats index is losing 15 members - including most of the banks - and gaining just one."

The case for global dividends
09/28/09   Dividends
"If you're a Canadian investor who believes in dividends, the fact that Canada makes up but 4% of the world's stock markets should lead you to a logical conclusion: that global dividends should make up a good chunk of your total portfolio."

Dividends and the frozen OJ syndrome
09/07/09   Dividends
"In light of the powerful historical evidence that companies can grow and still pay out somewhere around half their earnings as dividends, why is the demand for dividends today so small? If the theoretical case for high payout ratios is beyond dispute, why is the demand for dividends so small? In the wake of corporate and accounting scandals that one might expect to lift the demand for dividends, why is the demand for dividends so small? In view of the radical change in the taxation of dividends, why is the demand for dividends so small? As the King of Siam put it, 'It is a puzzlement.'"

There's hope in those dividends
05/03/09   Dividends
"Companies that have managed to increase their payouts in this tough economic climate may be a good target for a time-tested conservative investment strategy: buying shares of solid dividend-payers."

S&P 'dividend aristocrats' dwindle
04/02/09   Dividends
"The aristocracy is under siege. Standard & Poor's annual list of companies that increased payouts for at least 25 years is in danger of falling below 40 for the first time since 1992 after slumping profits forced executives to conserve cash."

High yield, low payout
03/29/09   Dividends
"How has the plain dividend yield strategy worked over the years? Stocks with high yields generally outperform those with low yields. The highest-dividend-yielding stocks were not overall leaders. Stocks ranking in decile eight had the best performance."

Canadian dividend yield strategy
03/29/09   Dividends
"What is the optimal combination of dividend yield and payout ratio for investors? We extend our coverage to the Canadian market in this report, expanding on our prior research, which examined the influences of dividend yield and payout ratios within the U.S. market. Consistent with our previous work, we find that companies with a high dividend yield and a low payout ratio had the best performance when applying our backtest methodology to large-cap Canadian companies since 1990."

S&P 500 Dividend Aristocrats
03/18/09   Dividends
"Since 1926, dividends have contributed to approximately one-third of total return while capital appreciations have contributed two-thirds. Therefore, both sustainable dividend income and capital appreciation potential are important to total return expectations. Managers use stable and increasing dividends as a sign of confidence in their firm's prospects, while investors consider such track records as a sign of corporate maturity and strength. The S&P 500 Dividend Aristocrats Index measures the performance of the S&P 500 index constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. The S&P 500 Dividend Aristocrats Class of 2009 includes 52 securities diversified across 10 sectors. The constituents have both growth and value characteristics. The composition of the S&P 500 Dividend Aristocrats contrasts with that of typical dividend oriented lists and benchmarks that have high exposure to Financials and Utilities sectors and have a steep value bias."

Slash and burn
03/07/09   Dividends
"For many firms dividend cuts are an unpleasant task that should not be shirked. There is no point in starving a business and endangering a firm.s balance-sheet in order to meet macho dividend commitments. The counter-argument, that cuts remove an important discipline on managers, hardly holds true today, when all firms are counting the pennies. That being so, when firms announced cuts why did their share prices slump? The reason has a lot to do with signalling."

Dividends falling
02/23/09   Dividends
"The fastest reduction in U.S. dividends since 1955 is depriving investors of the only thing that gave stocks an advantage over government bonds in the last century. U.S. equities returned 6 percent a year on average since 1900, inflation-adjusted data compiled by the London Business School and Credit Suisse Group AG show. Take away dividends and the annual gain drops to 1.7 percent, compared with 2.1 percent for long-term Treasury bonds, according to the data."

Dividend and conquer
02/19/09   Dividends
"Dividends are delectable again. This is to say, the bear market is renewing investors' appreciation of the contribution that dividends make to the returns of their stock portfolios -- as opposed to capital gains."

20 dividend plays for 2009
02/17/09   Dividends
"This year likely will see the largest annual decline since 1942 in dividends paid by the companies in the Standard & Poor's 500 index. S&P projects dividends will fall by 13% in 2009, and the numbers could get worse. "We're taking an optimistic view," says Howard Silverblatt, the senior index analyst at S&P. "If corporations don't see better business conditions later this year, dividend cuts could become more widespread.""

Dividend ETFs offer mild defense
02/12/09   Dividends
"High-dividend stocks proved only mildly defensive during the first phase of the debt crisis, and it is instructive to consider the reasons. Beaten down considerably, this important asset class cannot be too far from the bottom and is still churning out all-important cash payments."

Are dividends in dire straits?
02/06/09   Dividends
"Many companies, especially banks, have had to slash or eliminate payouts. How low will dividends go?"

Uncharted waters
02/02/09   Dividends
"The net result is that the market is pricing in a pretty severe outcome. American dividends more than halved between 1929 and 1931, but that was an extreme low; they have increased more than a hundredfold in nominal terms since then. According to Mr Long, the market is not expecting any dividend growth after 2010. Even in the depression, dividends more than doubled between 1931 and 1936. Figures from Britain, which date back to 1900, show that the biggest single fall in payouts was in 1919, when dividends fell 47%, but they more than doubled the following year. So the outlook for dividends, as reflected in swap prices, is historically unprecedented."

Dividends and the three dwarfs
12/31/08   Dividends
"The importance of dividends for providing wealth to investors is self-evident. Dividends not only dwarf inflation, growth, and changing valuation levels individually, but they also dwarf the combined importance of inflation, growth, and changing valuation levels. This result is wildly at odds with conventional wisdom, which suggests that, while the return from bonds is wholly dependent on income, stocks provide growth first and income second. It is startling to realize that dividend growth has averaged less than 1 percent above inflation during the past 200-year period. And it is shocking that real per-share dividend and earnings growth on the S&P 500 Index since 1965 has been zero."

Dividend ETFs: One way to ride out the storm
12/13/08   Dividends
"A jump back into the stock market right now will pay dividends right away. This is not a market-timing call, but rather a statement of fact. If you buy into an exchange-traded fund that tracks the broad stock market, you'll put yourself in a position to start receiving a surprisingly good flow of dividends."

Investors lick wounds from dividend cuts
11/08/08   Dividends
"Thirty-six companies listed on Standard & Poor's 500-stock index have cut or suspended dividends 46 times in 2008, sucking some $33.3 billion from investors' pockets, according to Standard & Poor's. From that sum, $30.8 billion came from financial companies, representing 37 individual actions."

Fear and value
10/09/08   Dividends
"The trend of late is clear: yields are rising, dramatically so in recent months. European yields lead the pack at 4.93% at last month's close, based on S&P Global Equity Indices. The U.S., Asia Pacific and the developed world-ex-US are also posting substantially higher dividend yields compared to recent years. For reasons that need no explanation, however, investors are reluctant to avail themselves of these higher yields. For comparison, the yield on the benchmark 10-year Treasury Note closed out September 2008 at 3.85%."

There's more to the story than dividend yield
08/27/08   Dividends
"There are two ways a company returns capital to shareholders: dividends and share buybacks. True yield measures the dividend yield, adjusted for any growth or shrinkage in the number of shares outstanding."

Dividends more reliable than share price rises
07/25/08   Dividends
"Growth in dividend payments is far more reliable than rises in share prices, according to analysis by Fidelity International. The research found that dividend payments from the UK market have shown an annual increase in all but five years since the beginning of 1965."

Dividends start to crumble
07/06/08   Dividends
"If you look at dividend payouts in the past 12 months, there has been a 9.73 percent increase overall, Silverblatt said. Still, that's less than the rate the payouts rose from 2004 to 2007. Each of those years, dividend increases exceeded 11 percent, he said. Many companies are now decreasing the rate at which they increase their dividends." [How to turn 9.73 percent growth into an alarming headline.]

Dividend growth beyond the TSX 60
02/27/08   Dividends
"The best dividend growth for stocks beyond the TSX 60 can be found in the financial sector - similar to the blue chips of the TSX 60. From 1995 to last July, however, mid-cap financial dividend stocks posted annualized gains of 20.2 per cent, compared with 17.9 per cent for their large-cap financial peers, and 10.8 per cent for the TSX Completion Index. Those figures do not include dividends."

Dividends: A world of smart yield plays
02/23/08   Dividends
"In the ongoing search for income investments, many U.S. investors are seeking yield instruments overseas. That's because foreign companies are increasingly initiating or boosting dividend payments. As of Feb. 13, the dividend yield on the S&P Euro 350 index was 3.2%, vs. a 2.1% yield for the S&P 500. And it's not just Europe. Stocks in Asia and emerging markets are also increasingly paying dividends."

Rising dividends are great
02/22/08   Dividends
"We love dividends. When we're having a bad day, nothing warms our soul like a juicy dividend increase. We're shallow that way. But not so shallow that we can't tolerate some dissension from people who actually have the temerity to argue that dividend increases maybe aren't the best use of a company's capital. And then these same people have the nerve to back up their case with cold, hard facts. When we looked at the title of the Thomson Financial report - "Baby, we got your dividend: What company actions do investors reward most?" - we were certain it would offer a ringing endorsement of our favourite investing strategy: Buying shares of companies that increase their dividends. So imagine our shock when the report told a different story. As you'll see, it doesn't suggest that dividend increases, per se, are a bad thing, but it does indicate that investors should pay attention to more than just the amount of cash companies pay out to shareholders, for dividend hikes can sometimes be a smokescreen for companies that are digging themselves into a hole."

High-yield stocks for retirement
12/06/07   Dividends
"Ned Davis Research recently crunched the numbers for Money and found that a high-yielding portfolio launched at the worst time in the past 40 years - before the 1973-74 bear market - not only would have kept your income growing at the pace of inflation but would have increased in value eightfold (assuming an initial withdrawal rate of 4.5 percent). An S&P 500 portfolio, on the other hand, would have been used up by now. Over time, high-paying stocks also generate more income than government bonds. That's because while bond income is fixed, dividends aren't."

Dividend index hides some dogs
10/17/07   Dividends
"We like dividends, particularly companies that raise their dividends regularly. For tax-efficient income and steady capital gains, it's hard to beat a basket of stocks that bump up their payouts every year. So, naturally, we were excited to hear that Standard & Poor's has launched a Canadian version of its "Dividend Aristocrats" index, with an exchange-traded fund expected to follow, possibly next year. Unfortunately, the more we learned about the index, the more glaring were its shortcomings."

The high dividend yield return advantage
10/03/07   Dividends
"There is an abundance of empirical evidence which suggests that portfolios consisting of higher dividend yielding securities produce returns that are attractive relative to lower yielding portfolios and to overall stock market returns over long measurement periods."

Dividend deluxe
09/08/07   Dividends
"Brace yourself for this because it's powerful stuff. If you buy the shares of a dividend grower today, in a decade you could be enjoying a tax-efficient flow of income with a double-digit yield. Bonds and guaranteed investment certificates offered double-digit yields back in the early 1990s, but it's hard to see that happening again any time soon. Income trusts commonly offered double-digit yields at one time, but mainly the weaker names do today. Anyway, few trusts offer the same level of blue-chip quality as the best dividend growers."

Dividends point the way
04/11/07   Dividends
"Dividend investing is often viewed as a conservative -- some might say boring -- strategy where you sacrifice first-rate share price gains for income through quarterly dividends. But it appears that if you buy the shares of companies that steadily crank up their dividends, you can have it all."

The importance of measuring payout yield
02/23/07   Dividends
"Previous research showed that the dividend yield process changed remarkably during the 1980's and 1990's, but that the payout yield (dividends plus repurchases over price) changed very little. As such, we investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find that the widely documented decline in the predictive power of dividends for excess stock returns is due largely to the omission of alternative channels by which firms distribute and receive cash from shareholders. Statistically and economically significant predictability is found in the time series when payout (dividends plus repurchases) and net payout (dividends plus repurchases minus equity issuances) yields are used instead of dividend yield. In the cross-section, we find that payout yield contains information about expected stock returns exceeding that of dividend yield and that the high minus low payout yield portfolio is a priced factor. Finally, we show that trading on this characteristic leads to excess profits that can not be explained by the traditional risk factors."

These dogs are barking
12/11/06   Dividends
"At the beginning of this year, you would have looked foolhardy if you had piled into General Motors Corp., Merck & Co. Inc. or Verizon Communications Inc. All three stocks were beaten up, and they looked likely to receive more poundings in the months ahead. Amazingly, though, each one has since exceeded all but the most eccentric expectations. So far this year, GM shareholders are basking in an 80% share-price gain, while Merck and Verizon are up 43% and 23%, respectively. Those kinds of numbers would bring a smile to the lips of any investor. The problem is, who could have guessed that stocks that looked so bad at the start of 2006 would make such gains? Well, if you had followed the Dogs of the Dow stock-picking strategy when making your investments back in January, you would have put a good-sized chunk of money on GM, Merck and Verizon. And you would now be feeling pretty good about making calls that seemed to defy all common sense only a few months ago."

Dividend stars: How to make up for trust tax
11/11/06   Dividends
"It's a great time to look hard at dividend stocks, even if many aren't exactly bargain-priced right now. Interest rates are expected to fall in the year ahead, which is positive for all income-producing investments. With the income trust market struggling to come to grips with a federal government crackdown on the sector, dividend stocks stand out as an obvious alternative. And if the stock market were to weaken next year, not an unlikely prospect with a fourth successive great year just about in the books, dividend stocks stand a good chance of escaping the worst effects."

Sticking to 'Dogs of Dow' strategy
09/21/06   Dividends
"Hennessy invests 75 percent of his fund's net assets in the 10 highest-yielding Dow stocks and 25 percent in U.S. Treasuries that mature in less than a year. He buys the dogs in equal dollar amounts each month and, in effect, runs 12 mini-portfolios that hold the stocks for a year. Then he sells shares to reallocate the proceeds among the Dow's 10 new dogs. The fund has a Sharpe ratio of 0.74, less than the 1.24 average for large-company value funds, according to Morningstar. While a higher Sharpe ratio indicates better risk-adjusted performance, the Hennessy fund's ratio is lower than its peers because of its Treasury market investments."

One-stop dividend shopping
05/14/06   Dividends
"How should you choose among these options? If you're seeking foreign dividends, PowerShares International is for you. If you value transparency, avoid the Mergent/Vanguard offering. Among the others, choices involve trade-offs. Indexes weighted by yield generally provide higher income than those weighted by market capitalization, but after-tax net can be lowered if the index includes REITs."

How dogs can be an investor's best friend
03/05/06   Dividends
"The so-called dogs strategy is to buy the stocks in various sectors or markets with the highest dividend yield. The background here is that as a stock falls in price, its dividend yield rises. Your goal in buying a stock like this would be to benefit both from the high yield and a rebound in the share price over time."

Dogs of the Dow
01/12/06   Dividends
"The Dogs of the Dow strategy has outperformed (total return) the broader index in three of the last five years. Why the success? It pays to be contrarian in stock investing, especially when dealing with pedigree companies like the Dow industrials. These blue chips may run into trouble, but they stand a decent chance of rebounding along with the value of their shares."

Trusts versus dividends
11/27/05   Dividends
"Trusts are still king if you want the highest possible income, but dividend stocks will be surprisingly competitive on an after-tax basis. The appeal of dividends is all the greater when you consider that you're more likely to get a reliable, even growing, stream of dividends from the average blue-chip stock than you are to get an uninterrupted flow of cash distributions from the average income trust."

Income trust decision announced
11/24/05   Dividends
"The federal government will cut dividend tax rates to deal with the tax arbitrage issue surrounding income trusts, and resume tax rulings on trust conversions" - Gee, only a few days before an expected election.

Make room for dividend payers
09/28/05   Dividends
"You can't find a clearer sign that a company is profitable, well-managed, and committed to sharing the wealth with shareholders than a long track record of paying dividends. If the company has also consistently increased the amount of cash paid out in dividends, that's all the better. Studies have shown that the shares of companies that pay dividends tend to beat those that don't, usually with a lot less risk."

Dividends and the three dwarfs
09/26/05   Dividends
"Dividends not only dwarf inflation, growth, and changing valuation levels individually, but they also dwarf the combined importance of inflation, growth, and changing valuation levels. This result is wildly at odds with conventional wisdom, which suggests that, while the return from bonds is wholly dependent on income, stocks provide growth first and income second."

Buy cheap and get paid to wait
09/11/05   Dividends
"Remarkably, the most overlooked aspect of dividends is the power of compounding. Depending on your starting point, dividends have made up as much as 60% of the total return of the S&P 500 in the last 100 years. Additionally, because of recent tax code changes, dividends now offer a competitive after-tax return to many fixed-income instruments, especially considering the present low-yield environment."

Nurture your dividend nest eggs
02/13/05   Dividends
"It pays to be somewhat contrarian and to buy those companies that are lowly rated and hence relatively unloved by the market. Similarly, it pays to buy smaller companies that are likely to be less well known by investors."

Income and the long view
02/13/05   Dividends
"Raver points out that, on average, after ten years the percentage of income attributable to income and its reinvestment is greater than 50%; the value of the income at that point exceeds the value of changes in the asset price of equities. After 78 years - the period covered by Ibbotson - the proportion rises to 96.2% of total return attributable to the dividend portion!"

Dividends count most in the long run
02/13/05   Dividends
"Statistically, the capital gains element in returns ultimately depends on dividends, or more precisely on the rate at which dividends grow. In a comparison of 17 countries, ABN-AMRO finds a close correlation between real returns (net of inflation) and the market average dividend yield plus the rate of dividend growth."

Thinking small over dividends
02/08/05   Dividends
"An analysis by Columbia University professors Doron Nissim and Amir Ziv of dividend-paying stocks between 1963 and 1998 showed that boosts to the payouts are linked to future profitability. The business school professors published their conclusion in a December 2001 article in the Journal of Finance. Another study, published last year by Robert D. Arnott and Clifford S. Asness in the Financial Analysts Journal, shows that future profit growth is fastest when current dividend payouts are highest."

Dogs can be investors' best friend
01/08/05   Dividends
"It looks like 2005 could shape up as the year of the dividend. Major investment dealers say in forecast after forecast that investors should look to dividend stocks this year as a way of playing defence in what is widely expected to be a soft year for stocks. Strategists like the classic safe sectors such as utilities, telecom, financials and consumer staples, but maybe you'd like to take a somewhat more aggressive stance."

Stock repurchases are replacing dividends
12/16/04   Dividends
"A new study by Amy Dittmar and Robert Dittmar of the U-M's Stephen M. Ross School of Business shows that the fraction of earnings paid out in dividends decreased steadily over the course of the 1990s, declining from its peak of 55.6 percent in 1991 to a low of 26.3 percent in 1999. During that same time period, the share of public firms paying dividends reached an all-time low of 24 percent. In 1997, the dollar value of stock repurchases surpassed that of dividends paid for the first time."

The death of dividends
05/24/02   Dividends
"the demise of dividends over the last 20 years was facilitated by greedy executives who used accounting shenanigans and the bull market to pocket significant stock option gains. Now that the bull market is over and accounting tricks are slowly being purged from financial statements all that remains is the greedy executives"

  Articles by
  Norman Rothery

Topics
  Academia
  Accounting
  Banks
  Behaviour
  Bonds
  Books
  Brokers
  Christmas
  Crime
  Debt
  Derivatives
  Disaster
  Dividends
  DRPs
  Economics
  Economy
  Education
  Fun
  Funds
  Government
  Growth Investing
  Halloween
  Health
  History
  Indexing
  Law
  Management
  Markets
  Marketing
  Media
  Pensions
  Pricing
  Real Estate
  Retirement
  Science
  Stingy Investing
  SNW
  Stocks
  Taxes
  Thrift
  Trusts
  Value Investing
  Wealth
  World

Personalities
  Warren Buffett
  Benjamin Graham
  Charlie Munger
  David Dreman
  Martin Whitman
  Tweedy Browne
  James Montier
  John Dorfman
  Prem Watsa
  Francis Chou
  Walter Schloss
  Seth Klarman
  Nassim Taleb
  Robert Shiller
  James Grant
  John Bogle
  John Neff
  Bill Gross
  Dan Hallett
  Tim Cestnick
  Jason Zweig
  Norm Rothery

Article Archive
  2001
  2002
  2003
  2004
  2005
  2006
  2007
  2008
  2009
  2010
  2011
  2012
  2013
  2014
  2015
  2016
  2017
  2018
  2019
  2020
  2021
  2022
  2023

 
About Us | Legal | Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...