Stocks That Pay Dividends
Dividend-Paying Turnaround Investing Stocks
We here at The Turnaround Letter have always liked dividend paying stocks for three principal reasons:
- First, if the stock stays flat for a while, you get paid something while you wait for it to move up.
- Second, if the market goes down, stocks that pay dividends tend to go down less because their holders are not quite so anxious to sell them.
- Third even though dividend rates may seem low, they add up to real money over time. If you hold a stock that has a 3% dividend yield for four years, the dividend adds 12% of incremental return. As a friend of ours likes to say, “That’s better than a poke in the nose.”
Recently, investors have been pouring into certain dividend paying stocks, particularly utilities and REITs as bond substitutes, since actual bond yields are so low. That has pushed the prices of these bond substitutes up quite a bit over the last year or two, and we think they may be vulnerable when interest rates finally do begin to rise.
