Should Companies Tie Dividends to Cash Flow?

In a recent Barron’s interview, Goldman Sachs global co-head of single-stock research Jim Covello makes the case for variable  dividends that are contingent on business’s available cash flow. According to Covello, 121 of the 700 dividend-paying companies in the Russell 1000 Index have suspended or eliminated payouts this year, especially in such sectors as energy, consumer discretionary and industrials. Here are key takeaways from Covello’s comments: “This is a concept that I’ve actually been talking… Read More

Nine-Year Dividend Squeeze Coming for U.S. Investors

Investors in the U.S. will have to wait nine years for dividends to recover from the coronavirus-related downturn, according to a recent article in the Financial Times. The prediction is based on the prices of futures contracts linked to annual dividends for S&P 500 businesses, which reportedly doled out nearly a half trillion dollars in dividends last year but have come under pressure to cut payouts to shareholders. Instead, the businesses have had to “focus… Read More

How to Figure Out Mutual Fund Dividend Yields

Unlike those of common stocks, dividend yields of mutual funds are difficult to calculate, according to a recent article in Barron’s. For common stock, the calculation requires dividing the annual dividend per share by the stock price. But the process is more complex for mutual funds, the article reports, “given how many pieces to the puzzle and different yield readings there are.” Therefore, investors rely on yields disclosed by advisors or by the fund themselves—but… Read More

Dividends Can Help When Value Trails Growth

Dividend stocks maybe help “narrow the performance gap for a value investor,” according to a recent article in Barron’s. But the article adds, “whether a company pays a dividend isn’t the only factor to consider.” It cites comments from T. Rowe Price Dividend Growth fund Tom Huber, who warns investors to be mindful of sectors before “diving in to add dividend investments.” Huber cites utilities, real estate investment trusts and consumer staples as examples of… Read More

The Case For Dividend Investing Via The Dividend Aristocrats

Investors looking for high-quality stocks to own for the long-term should consider investing in dividend stocks, particularly high-quality dividend stocks like the Dividend Aristocrats. To be a Dividend Aristocrat, a stock must be in the S&P 500 Index, have a float-adjusted market capitalization of at least $3 billion, and a track record of at least 25 consecutive years of dividend growth. Of the 505 stocks that comprise the S&P 500 Index, just 57 of them… Read More

Why Stock Dividends Are Slowing Down Around the World

The latest installment of the quarterly Janus Henderson Global Dividend Index shows that while second-quarter global dividends hit a new record, they grew at a slower rate as a result of a strong dollar. This according to a recent article in Barron’s. The report shows that global dividends for the second quarter of this year totaled $513.8 billion compared to $508.1 billion one year ago—a growth rate of 1.1% compared to a 14.1% increase last… Read More

Some Buyout Firms Taking Debt-Laced Dividends

A new Moody’s report shows that certain aggressive buyout firms are taking debt-financed dividends from the companies they own, and “potentially jeopardizing their ability to navigate a downturn,” according to an article in Institutional Investor. The report shows that, since the end of 2009, Leonard Green & Partners, American Securities, Golden Gate Capital, TPG, and Apollo Global Management “have most frequently taken debt-financed dividends from companies they’ve bought,” with Apollo standing out because the dividends… Read More

In Volatile Times, Investors are Wooed By Cash

“In a year of rising interest rates, resurgent stock volatility and creeping political risk, many investors are taking solace in dividends,” says a recent article in The Wall Street Journal. As the market becomes increasingly unsettled, the capacity of companies to shell out cash in the form of share buybacks and dividend payments is becoming of key importance to investors, the article says. This is further fueled by the fact that U.S. companies are enjoying the… Read More

Record Dividends for S&P 500 in First Quarter of 2018

Companies in the S&P 500 “spent a record amount on dividend payments in the first three months of the year,” according to a recent article in MarketWatch. The article cites data from S&P Dow Jones Indices that showed an $18.8 billion net increase in U.S. common stock dividends in the first quarter of 2018, compared with a $10.9 billion rise over the same period in 2017. According to Howard Silverblatt, senior index analyst at the… Read More

Cautious Dividend Investing a Must

Given the historically low interest rate and return environment, investors hungry for yield have been gravitating toward dividend stocks, but the valuation advantage of this asset class has diminished. This according to an article in this week’s Forbes by Validea CEO John Reese. “Since yield no longer provides a reliable valuation tool” writes Reese, “investors in search of such dividends must be sure to use other metrics to gauge value.” He emphasizes the importance of… Read More