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Archive for the ‘Dividends’ tag

Divdends of Dow 30 stocks

Here’s a nice list of the dividends on Dow Industrials stocks as of Feb. 2. Caterpillar is No. 9; its yield as swelled to 5.45 from 3.85 just since the first of the year. Marc Cortenay, who compiled the list, expects the Dow to sink to 6,000 this year before “laying the foundation for the next major bull market.”

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Tom Mangan posted at 7:44 am February 4th, 2009 |

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 |

Handy links for dividend hunters

Bloomberg lists the dividends of S&P 500 stocks. Caterpillar’s yield is 3.76, but here’s something that may surprise you: Intel’s dividend (3.82) is even better. Heck, I thought tech stocks didn’t pay dividends.

(Dividends yield basics: yield travels in the opposite direction of price, so stocks with extremely low prices can have extraordinary dividends; the caveat being that extremely low price usually represents the market’s judgment on the company’s overall prospects. Gannett, the newspaper chain, is paying a 20 percent dividend, for instance, but newspaper stocks are off by an average of 83 percent in the last year).

Dividends, incidentally, are essential to the popular Dogs of the Dow strategy.

“Dogs of the Dow” or “High Yield 10”, is a popular investment strategy that defines a portfolio by equal dollar value investments into the 10 highest yielding Dow stocks at the end of a year. The theory behind the strategy is that dividends are more stable than stock prices and therefore, a high dividend yield reflects a stock that is near the bottom of its business cycle and has a beaten down share price that is poised for a rebound.

Good news: Cat is not a Dog.

Lastly: Some folks buy stocks just before their dividends are paid, then cash in shortly afterward. Note this supposedly works best in bull markets.

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Tom Mangan posted at 8:16 am January 2nd, 2009 |