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August 24, 2011 at 12:15 PM
A new white paper released by investment manager Cohen & Steers on Monday maintains that dividend oriented companies are “strongly positioned to continue raising pay-outs and deliver solid returns.” The report also says these companies are “trading at attractive prices and offer great upside potential.”
The whitepaper echoes a piece written by Jeremy Siegel, a Wharton professor and frequent industry lecturer, in The Wall Street Journal also on Monday, in which Siegel says dividend-paying stocks, backed by record amounts of cash, are a wise defensive move in light of the current environment.
In the Cohen & Steers report, entitled “Return of the Dividend Growers,” Rick Helm, senior vice president and portfolio manager, points out numerous reasons for investors to seek out dividend paying stocks, including:
- Since 1926, dividends have contributed more than 40% of the U.S. market’s total return.
- Dividend payers outperform nonpayers and do so with less volatility.
- Dividends have been raised; net payments rose by a record $25.5 billion in the first half of the year.
“History tells us that quality companies with stable, growing dividends have generated better returns with less volatility than those that do not pay dividends,” Helm writes. “But when the economy is in the early stages of expansion, investors often gravitate toward riskier companies with the potential for the fastest earnings growth and multiple expansion. The latest cycle has been consistent with this pattern, leaving dividend growers behind in the stimulus-induced rally among lower-quality stocks.”
