Word: dividenders
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...lesson for investors--even conservative income investors--is clear. By grounding your portfolio in dividend-paying stocks, over time you can enjoy the same regular payments that coupon-clipping bonds deliver with the dramatic upside of potential capital appreciation. The kicker: with most dividends now taxed at just 15%, many investors can get better after-tax returns from stocks than from bond yields, which continue to be taxed at personal-income rates as high as 35%. The number of firms paying dividends--376 of the S&P 500--has risen for the second year in a row after more than...
...course, investing in stocks rather than bonds does carry some greater risks. Your return of principal is not guaranteed, and a company can choose to cut its dividend. So how can you tell if a particular dividend payer is a wise investment? Start by looking at dividend yield--the annual payout divided by the stock price. Still, betting on a company solely because it carries a high yield is risky. In mid-October, for instance, department-store company Saks offered a dividend yield above 16%. But the stock had fallen 33% over the previous six months, and uneven sales trends...
...perhaps it's no surprise that stodgy dividend stocks--blue-chip companies with modest but consistent single-digit earnings growth--have returned as an investment of choice. As Frank M. Felicelli, portfolio manager of the Franklin Equity Income fund, puts it, "It's back-to-basics investing...
Here's a promising screen: we looked for dividend yields of between 2% and 4% (the S&P 500's yield is 1.68%), long-term earnings growth of better than 10% and a consistent hike in dividends. We looked too at the payout ratio--the percentage of earnings that is paid out in dividends. The lower the ratio, the easier it is for companies to meet their dividend obligations. Payout ratios vary by industry, but generally speaking, 50% or more is considered sizable; 75% or higher may be a red flag...
...well. Labor's mentoring proposals are only the first of what could be many Tanner-inspired measures. Tanner says non-material issues, such as relationships, leisure and community bonds will grow in prominence. "The old politics of electoral bribes and pandering to special interests will steadily decline as the dividend it delivers, already fading, will fade even more." It doesn't feel that way in this election campaign, but Tanner may once again be a few steps ahead of the pack...