Market Overview

Time To Give Dividend Its Due Importance


According to an article in SmartMoney, dividend had lost flavor with investors in the 1980s, when they started favoring stocks that offered returns through share buybacks. The extent of the diminishing importance of dividend as the deciding factor for investors can be seen from the fact that returns from dividends in the 1990s fell to just 14%, from 50% in the 1970s.

Dividends can sometimes act as a trap. However, they can significantly impact returns, especially when compounded over time. Data from the CBOE and Bloomberg indicates that while an investment of $1 in the S&P 500 index in 1970 grew to $12.89 by November 30, 2009 based on price alone, the return worked out to be $45.74 when dividend was reinvested.

Some of the high paying electric and natural gas utility stocks are EQT Corporation (NYSE: EQT), Black Hills (NYSE: BKH), Northeast Utilities (NYSE: NU) and Great Plains Energy (NYSE: GXP). Some funds, such as iShares S&P Global Utilities (NYSE: JXI), PowerShares Dynamic Utilities (NYSE: PUI), iShares S&P Global Utilities (NYSE: JXI) and PowerShares Dynamic Utilities (NYSE: PUI), also stand out in terms of returns.

Posted-In: Dividend Dividend Plays SmartMoneyMarkets


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