A Good Environment For Dividend And Growth Stocks

Includes: BPT, GE, O, OKE, T
by: Bill Gunderson

Not all dividend paying stocks are created equal.

I get sick of hearing the following investment advice: " You can buy the stock here and get paid to wait for the stock to appreciate."

How long do I have to wait? Many investors have been waiting around for some capital appreciation out of such stocks for years.

Let me give some examples:

Data From Best Stocks Now App.

I can get paid a handsome dividend yield of 6.1% on the shares of AT&T (NYSE:T) right now while I wait - and wait - for my capital appreciation.

You'll notice that while poor investors have been collecting their dividends in AT&T over the last 10 years, they have experienced a loss in the value of the shares.

Take away the dividend and the stock has been going down by about 4% per year over the last decade.

I'm still waiting ...

I realize that investing is all about the future, but AT&T's track record does not instill a lot of confidence in future expectations of capital appreciation.

Now let's look at an even worse example of a so-called blue-chip "high dividend" payer. GE (NYSE:GE) currently offers a very attractive 3.9% dividend yield. When compared to CD rates and U.S. Treasuries, 3.9% sounds pretty attractive.

Investors can get paid handsomely to wait for General Electric's return to its former glory. I think I will wait for new management.

While investors have been collecting their dividends from GE over the last 10 years, the stock has been going backwards for a net result of negative 6.2% per year.

This so-called Blue-Chip stock was down a whopping 54% in 2008, but investors were getting paid to wait.

I think that I will pass again.

Data From Best Stocks Now App.

How about some growth along with my dividends? I want the best of both worlds. I want something that gives me a better yield on the paltry rates that banks are paying on CDs right now. I would also like a little growth if possible. CDs have no chance of that.

I need more income than the stingy 2.0% that 10-year treasuries are offering right now.

It is hard for me to imagine capital appreciation out of my treasuries right now. For that to happen, interest rates would have to go significantly lower. That is hard for me to imagine that right now.

Consider the following dividend payers instead:

Data From Best Stocks Now App.

Oneok Inc. (NYSE:OKE) currently has a dividend yield of 2.8%. Not quite as juicy as AT&T and General Electric's yield, but look at the difference in total performance.

Along with that dividend, investors have received some very serious capital appreciation with their investment.

Over the last 10 years, the stock has delivered a total average return of 20.7% per year. Over the last 12 months, the stock is up a whopping 62.3%. Now I know that investing is all about the future, but those are some pretty impressive returns.

What if this stock was an open-ended mutual fund as opposed to a stock? This would be the number one mutual fund in the universe.

Let's take a look at another example:

Data From Best Stocks Now App.

Realty Income (NYSE:O) is a Real Estate Investment Trust (REIT) here in my neck of the woods of San Diego. They are a bit unique in that they pay their dividend monthly. They also have an excellent record of increasing their dividend over time.

I especially like the fact that over the last 10 years, I have received a total return of 15.8% per year from the stock of Realty Income. Contrast that with the 10-year return of Warren Buffett's Berkshire Hathaway of 5.2%.

Nice to also know that Realty Income was only down 8.2% in 2008 when the market was down 38.5%.

I don't mind getting paid to wait on this one.

One more:

Data From Best Stocks Now App.

I have heard most of the arguments for and against BP Prudhoe Bay (NYSE:BPT) over the years. While the arguments have been taking place, the stock has delivered a very cool return of 39.5% total return per year over the last 10 years.

The current dividend yield on the shares is currently 7.1%. I also like the fact that the stock was up 4.3% in 2008. Once again, I will take my chances on capital appreciation here while getting paid to wait.

I could give numerous other example of dividend traps vs. dividend plus growth darlings, but I will save that for future articles.

Next time you hear the following on one of the financial channels: "Investors will get paid to wait," check out the total returns of the stock in question.

Disclosure: I am long OKE, O, BPT.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Problem with this article? Please tell us. Disagree with this article? .