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Focusing On Dividends Alone Remains A Big Mistake

Published Tue, 28 Feb 2012 09:58:57 -0500 on Seeking Alpha

Investors continue to focus on dividends as the best and in some minds the only way to return capital to shareholders. That remains a big mistake as the population of stocks with a high dividend payout ratio, not to mention ones that even pay dividends has been shrinking just about every decade. Several key factors have influenced these decisions. First, the historical tax disadvantage of dividends versus long term capital gains has worked to weaken the focus on dividends. Second, the SEC instituting rule 10b-18 back in 1982 made it easier for firms to implement buybacks without stock manipulation charges. Third, market participants place such a great emphasis on maintaining steadily increasing dividends that corporate boards prefer the flexibility of buyback programs over the negativity of reducing a dividend. Mebane Faber at the World Beta blog posted a great summary of the decline in the dividend payout ratio and the... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
SOUTHERN COMPANY 43.06   50.7 0.85 2.32 5.27
VERIZON COMM 47.74   6.5 7.36 2.36 4.81
ALTRIA GROUP 62.95   11.8 5.32 2.64 4.03
MERCK & CO 54.22   58.3 0.93 1.92 3.42
KOHL'S 66.09   17.5 3.77 2.20 3.28
ISHARES DOW JONES SELECT DIVIDEND INDEX FUND 96.38   0.0 0.00 2.96 3.00
GAP 31.58   14.6 2.17 0.92 2.86
ELI LILLY 77.02   0.0 -0.20 2.25 2.81
SPDR S&P DIVIDEND ETF 91.62   0.0 0.00 2.10 2.23
VANGUARD DIVIDEND APPRECIATION ETF 102.83   0.0 0.00 0.00 2.10
TRAVELERS 139.00   19.0 7.31 2.88 2.02
CONOCOPHILLIPS 54.31   0.0 -0.50 1.14 2.01
NORTHROP GRUMMAN 350.04   30.5 11.47 4.40 1.13

SOUTHERN COMPANY - SO
SOUTHERN COMPANY - SO  


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