Are Dividends Still Cool?
Dividend-paying stocks have had a good run, but some experts are warning that the trade is becoming overextended. Charles Rotblut shares his current view of these markets.
Are dividends still cool? We're here with Charles Rotblut, who is going to answer that question for us.
Thank you. I do think they are. It's a common perception among investors that if they want to have rising stock prices, they should buy growth stocks that don't pay dividends, and then if a company starts paying dividends that's a bad thing.
Ned Davis Research has run the numbers. Since 2002, had you bought stocks that either initiated or raised their dividend, you would have got about 3,500% return. Had you bought stocks that didn't pay a dividend, your returns would have been about 70%. You still would have made money, but that's a huge gap.
So this perception that dividends aren't cool, that you can't make money, is actually wrong. If you have a company that's paying dividends, has the ability and willingness to raise it, and you reinvest those dividends, you really can make a substantial amount of money in the stock market.
Back in the dot.com boom, you know, it was "growth is the new income," and now we kind of have that flipped on its head to a certain extent. Because I think perhaps 2008 and the flight to safety and looking at what used to be traditional dividend stocks, and then once those were all bought up, everybody started throwing out dividends and we have MLPs and Canadian Royalty Trusts and new vehicles that are kicking off big dividends.