Word: dividenders
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Dates: during 1990-1999
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...Cash dividends to shareholders are disappearing quicker than Bill Clinton's credibility. Last year companies in the Standard & Poor's 500 paid out only 37% of their earnings as dividends, an all-time low. The average payout since 1945 is 52%. Corporate stinginess has helped drop the S&P 500 dividend yield (dividend divided by stock price) to 1.6%--so subterranean that merely calling it an all-time low doesn't do it justice. It is less than half the postwar average yield of 4.1% and way below the previous low-water mark...
Seven years ago, Michael O'Higgins, a successful if inconspicuous money manager, thrilled the investment world with a simple formula for generating superior returns: Buy the dogs. He discovered that if you buy the 10 stocks among the Dow 30 with the highest yields (dividend divided by price) and updated the portfolio once a year, the returns would triple those posted by the Dow Jones industrial average over the previous two decades. O'Higgins' 1991 book, Beating the Dow, was an instant hit and spawned a cultlike following. There are two Websites, three mutual funds, dozens of Unit Investment Trusts...
...gold is Field's. His father owned the Chicago-based Marshall Field's department stores, leaving him a fortune. A ponytailed, multimillionaire socialite, Ted Field enjoyed the usual rich-boy playthings--racing cars and producing films--but chafed at his playboy image. Bored with collecting dividend checks, he asked his friend U2 manager Paul McGuinness about getting into the record business. "You can have all the money in the world and be the unhappiest guy in the world," says Field. "I wanted to do something that meant something in my life." And what would that be? Making hard-core...
...Eleven of the 30 companies in the Dow Jones industrial average have such programs. "Look for 20 Dow stocks to have them by the end of next year," says Charles Carlson, editor of DRIP Investor, a newsletter based in Hammond, Ind., that reports on direct-purchase and dividend-reinvestment programs. Just because a company offers stock for direct purchase doesn't make it a great investment. But it's a nice edge if the stock is one you'd like to own anyway...
Another departure from the past has to do with the stocks of small companies. They typically do not pay a dividend--the payoff is in price appreciation. That makes them more desirable when the cap-gains rate falls because dividends get taxed as ordinary income--a higher rate for most investors. Yet big stocks have been rising fastest all year, and that could persist. Why? Big stocks, as defined by the S&P 500, now have a measly 1.6% dividend yield, vs. 6% in the early '80s. In short, they're also being managed for growth instead of income...