The spotlight is again on dividends after Intel raised its payout last week and the Federal Reserve said it might soon allow banks to increase their payments.
While U.S. investors have long been reluctant to embrace dividend stocks, there are some signs investors are paying some more attention.
Intel shares jumped 1.5% Friday after the company announced a 14% increase in its dividend. And bank stocks rose almost 6% in the two days after a report the Fed may loosen its rules to allow banks to increase their dividends.
In the first part of the rally from the March 2009 lows, stocks of non-dividend paying companies far outpaced stocks of those who do pay dividends. But as interest rates have reached new lows and the economy has remained sluggish, dividend paying companies have been catching up. The 372 dividend paying S&P stocks have a total return of 12.5% including dividends, since the end of June.
The reasons supporting investing in dividend paying stocks are many: Most importantly, the S&P 500 stock index is chock full of companies sporting yields higher than the 10 year Treasury note.
At least one class of dividend stocks is doing well: the S&P 500 Dividend Aristocrats index, the handful of S&P 500 companies that have increased their dividends for at least 25 consecutive years. These 46 stocks which include Exxon, McDonalds, Proctor & Gamble and Walmart have outperformed the S&P this year with total returns of 13.8%.
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