It's true, I probably would have shied away from writing a
follow-up column if I had screwed up ... but I didn't.
As I pointed out at
the beginningand the
middle of 2008, dividend-paying stocks make the best
bear-market investments.
The reasons are simple:
But as I
pointed out in February, it's important for investors to
buy shares of the strongest dividend-paying companies -- in
other words, companies with realistic payout ratios.
Sound advice indeed
Lo and behold, from the market's bottom on
March 9 through yesterday's close, dividend-paying stocks --
as tracked by the
iShares Dow Jones Select Dividend ETF -- are
outpacing the S&P 500 by 57.4% to 55.9%.
That's pretty good news for investors who were fortunate
enough to heed my advice and buy at the perfect entry
point.
It's actually not bad news for everyone else
See, despite that 57% run-up, today is
stilla perfect time to get in on dividend-paying
stocks.
Why?
Many strong stocks are still yielding more than their
five-year average, but not because their underlying
businesses are on the rocks. No, these high yields exist
purely because the stock's price is still depressed.
Just take a look at these large caps and their attractive
yields. All of these companies have
increasedtheir dividend payments over those five
years (an excellent sign of health).
Company
5-Year Average
Dividend Yield
Current
Dividend Yield
5-Year Average
Growth Rate
in Dividend
Best Buy (NYSE: BBY)
1.0%
1.4%
12.4%
Williams Companies (NYSE: WMB)
1.4%
2.2%
47.7%
Valero (NYSE: VLO)
1.0%
3.1%
37.5%
Automatic Data Processing (NYSE:
ADP)
2.2%
3.3%
25.0%
McDonald's (NYSE: MCD)
2.2% Continued... |