The official U.S. unemployment rate stood at 9.6% last month. The number of unemployed persons according to to government data totaled 14.9 million. 42% of those unemployed in August were long-term unemployed (27 weeks or more). Many of the other economic figures published nowadays are also negative. While some talk of a double-dip recession, others are even more pessimistic. For example David Rosenberg, chief economist of Gluskin Sheff recently outlined 13 reasons to suggest that this so-called recovery is actually a depression.
In an related note Matthew D. McCormick, Portfolio Manager at Bahl & Gaynor Investment Counsel said:
Many people believe the U.S. economy is out of the recession or close to it. At Bahl & Gaynor, we think this recession is like no other since the Great Depression and the subsequent recovery will be longer – and weaker – than most expect. Thus, an extended period of tepid economic and earnings growth is a distinct possibility. Such a recovery could be similar to the 1974 to 1982 economic “malaise.”
If a protracted economic stagnation similar to 1974 to 1982 repeats, then investors may want to invest in dividend paying stocks (click on chart to enlarge). The S&P’s price return during this period was an annualized 4.14%. However the total return (including dividends) for this period was an annualized 9.39%. Hence dividends accounted for 55.09% of the S&P 500’s total return.
Source: Bahl & Gaynor Investment Counsel
Ned Davis Research analyzed the S&P data for the same period and found that dividend paying stocks also outperformed non-dividend payers by an annualized 3.89%.
Hence instead of worrying about whether we may have a double-dip recession or not, investors looking to select some stocks for their portfolio may want to consider adding dividend paying stocks.
Some foreign stocks have much higher yields at current levels. A few of the high yielding foreign stocks include French utility giant Veolia Environnement (VE) paying 5.75%, Italian oil major Eni SpA (NYSE:E) yielding 6.14%, Brazilian electric utility CEMIG (NYSE:CIG) with an yield of 5.17%, National Australia Bank Ltd (OTCPK:NABZY) paying 5.67% and Philippine Long Distance Telephone Co (NYSE:PHI) with a dividend yield of 6.22%.