Why Dividends Matter -- And Some Yield/Growth Picks

Think dividends are of little importance to investment returns? Consider this stat from Standard & Poors:

From January 1926 through December 2004 the annualized total return for the S&P 500 was 10.46% per year. The dividend component consists of 41.28% of the return.

41.28% is a much larger number than we would have guessed. If you’re now ready to go yield hunting, consider starting with these names from Jack Hough’s “Not Just Income” screen in Thursday's Wall Street Journal which “makes modest dividend demands while looking for stocks that seem likely to increase in value.” Hough ran the same screen in January and it has since returned 7.4% vs. 1.2% for the S&P 500.

(Trailing P/E, Yield -- from Yahoo Finance)

* Autoliv (ALV) 16.88, 2.3%
* Bank of New York (BK) 16.66, 2.50%
* Black & Decker (BDK) 13.90, 1.70%
* Briggs & Stratton (BGG) 12.92, 2.60%
* Eaton (ETN) 14.19, 1.80%
* Exxon Mobil (XOM) 10.92, 2.00%
* First American (FAF) 8.59, 1.8%
* Intel (INTC) 15.64, 2.10%
* Selective Insurance (SIGI) 11.84, 1.70%

Comments

[DavidJackson]

Look at the list of recommended stocks in the comment below, left in April. Isn't this a great example of how buying stocks because of their dividend yield can be a mistake? Three of the stocks are large cap financials, which were subsequently creamed.


On Apr 28 10:39 PM Anonymous wrote:

> Missed out the main companies which have had the best stock gains
> and sport a higher yield
>
> Altria MO has around 4%
> JP Morgan has around 4%
> Bank of America around 4%
> Citigroup around 4%