Consider (Strongly) Dividend-Paying Stocks!

Consider these challenges facing investors: 

  • Interest rates are still low. 
  • Inflationary pressure is growing by the day. 
  • Our country is involved in three Middle East wars.
  • Budget deficits are everywhere…and growing.
  • Housing shows scant signs of improvement.
  • Per barrel oil prices recently hit $110. 

These challenges and others have contributed to a noticeable increase in market volatility, and that has placed dividend-paying stocks squarely back in the spotlight.  

Long valued for defensive characteristics, their combination of steady income and capital appreciation has delivered consistent and strong returns over the longer-term.  Here are six reasons to consider dividend-paying stocks: 

  • Stronger Total Return – Dividend-paying stocks offer potential for share appreciation and cash income.  Combined, when dividends are reinvested, total return is significantly greater than price appreciation alone:  9.4% vs. 5.2% since December 31, 1929. 
  • Indicator of Corporate Health – A company’s ability to pay dividends over time provides some measure of tangible evidence of that company’s overall financial health.  In addition, dividends enhance earnings transparency and place a certain level of financial discipline on management. 
  • Lower Relative Volatility – When equity prices decline, cash dividends help buffer portfolio losses;  moreover, stocks with higher dividend yields tend to generate stronger returns…with less risk. 
  • Higher Returns Independent of Interest Rate Movements – No one really knows what the Fed will do and when!  Historically, dividend-paying stocks have outpaced their non-paying brethren, and today, many stocks offer dividends that are significantly greater than interest paid by high-quality bonds. 
  • Downside Protection During Turbulent Cycles – Just as dividend-paying stocks tend to outperform non-dividend paying stocks in a bull market, the same is generally true during a bear market.   
  • The Tax Man Cometh – Congress recently extended many of the Bush tax cuts, and that includes a continuation of the favorable dividend tax rate of 15%.  This further enhances after-tax returns for certain affluent and other tax-sensitive investors.

In summary, investors are faced with growing market volatility, low interest rates, increasing geopolitical risk, and other threats to economic growth.  For some investors, dividend-paying stocks are a good solution. 

Talk to your Wealth Manager or Financial Advisor!

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One thought on “Consider (Strongly) Dividend-Paying Stocks!

  1. Appropriately written that investing in these dividend paying stocks leads to huge benefits if you will implement things in an accurate manner. Keeping in focus these above mentioned challenges enable you increase your profits and an additional amount will be added in your monthly income.

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