The research linking rising dividends with superior long-term returns continues. The latest is from a recent report from Ned Davis Research, described in the Wall Street Journal article “Look for Firms That Raise Dividends“. Below are some highlights of the article:
- Since 1972, S&P 500 stocks that consistently increased their dividends returned 10.4% total return (dividends + share price appreciation) while those that did not increase their dividends returned only 8.2%.
- The 2.2% advantage of the dividend raisers would equate to an additional $1,802 per $100 invested in 1972.
- “A board that raises dividends, year in, year out, shows it is confident that the company’s outlook is strong,” says Rick Helm, manager of Cohen & Steers Dividend Value.
The article rightfully noted that a history of rising dividends doesn’t guarantee the company can sustain the increases. After the sub-prime melt-down there are a significant number of companies that could not maintain their dividend such as Citi (C) and Washington Mutual (WM). Investors must perform their own due diligence to determine if a company can sustain its dividend.
Dividends are an excellent measure of the quality-of-earnings; cash is hard to fake!
Before you look at other homes for sale, confirm if the mortgage on the old one is paid back completely and that there is no credit card debt on your business cards and your health insurance is not at risk.
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