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More stocks that pay fat dividends

Caterpillar is included in a bunch of stocks whose dividend yields are higher than usual in this Wall Street Journal item:

CNBC host James Cramer uses the term “accidental high-yielders” to describe companies like Caterpillar. He means it’s a strong company that’s meant to have a skimpy dividend yield but now has a fat one thanks to the stock market’s recent plunge. Hence, its shares are worth buying.

I agree with the conclusion, especially on Caterpillar, but not with the term. The accident, as near as I can tell, is that stocks since 1802 have yielded an average of 4.9%, but a bubbling up of prices stripped yields to an average of 2.2% over the past two decades. The market’s price drop last year lifted yields from 1.9% at the end of 2007 to 3.3% today. That seems less an accident than a return to normalcy.

Even if you hate the harrowing plunges Cat’s been taking of late, you can console yourself in the knowledge that the lower prices are driving up the dividend yield (because you can buy many more shares at lower prices and dividends are divvied out on a per-share basis … the more shares you own, the more dividends you earn. Opposite is also true: in a raging bull market it’s impossible to make much on dividends).

My favorite on the list linked above: Harley Davidson, the Hog-maker whose stock’s gotten slaughtered and now is yielding north of 9 percent.

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Tom Mangan posted at 12:03 am January 15th, 2009 |

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