Tack

Dividends Get No Respect

We have been passing through the greatest period of opportunity for dividend-paying-stocks in history, or at least in my sixty years of lifetime. This is especially true for various preferred and exchange-traded debt issues, which were crushed into oblivion, just like their common-stock breathren. While it might have made sense to have common shares obliterated on uncertain earnings outlooks, it made little sense for the higher-capital-structure issues to follow in tandem unless all the firms were going to go bankrupt. This is how the market was pricing issues, almost across the board, even though this was ridiculous as a generalization.

Now, many of these issue have made startling rebounds, but some still have a significant distance to travel before they regain pricing which represents interest-rate spreads, rather than payment-risk or bankruptcy premiums.

Two areas which remain undervalued, in my own assessment, are commercial realty issues, where total disaster remains calculated into common shares and sizable discounts into preferred prices, and business development companies (BDC's) which appear radically undervalued, if one believes that the economy will revive and IPO markets will again thrive.