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Do Dividend-Paying Stocks Make Better Investments?

Published Fri, 11 Jan 2019 14:11:21 -0500 on Seeking Alpha

Investors mistakenly believe that dividend-paying stocks make better investments. A company paying dividends is thought to have a more concrete valuation and the dividends are beloved by retirees who can visually see the dividends supporting their withdrawals. In other words, dividends are loved because you can take your dividends to the bank and spend them.
The math and science of factor investing are a little more complicated than this simplistic thinking though.
You can calculate a stock's dividend yield by dividing the annual dividend payout by the stock's current price. Dividend stocks are those that have a high dividend yield.
You can calculate a stock's price per earnings or P/E ratio by dividing the stock's current price by the historical or expected earnings. Value stocks are those that have a P/E ratio.
Dividend stocks are usually on the value end of the spectrum. For this reason, value and dividend-paying stocks often move in sync with one another. But all things being equal, it is value stocks which outperform, not dividend-paying stocks.
Consider three stocks with the following characteristics:
Value Stock V
$28 per share price $3 per share earnings $1 per share annual dividend payout And, therefore, the following metrics:
3.57% dividend yield ($1 / $28) 9.3 P/E ratio ($28 / $3) Blend Stock B
$28 per share price $2 per share earnings $1 per share annual dividend payout And, therefore, the following metrics:
3.57%... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND 10.17   0.0 0.00 0.00 12.62
TORTOISE MLP FUND 13.57   0.0 0.00 0.00 12.38
TORTOISE ENERGY INFRASTRUCTURE 23.01   0.0 0.00 2.62 11.29
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPP FUND 6.36   0.0 0.00 0.00 11.02
NUVEEN ENERGY MLP TOTAL RETURN FUND 9.20   0.0 0.00 0.00 10.82
CUSHING MLP TOTAL RETURN FUND 10.48   19.1 0.55 0.00 10.32
FIRST TRUST MLP AND ENERGY INCOME FUND 12.09   39.0 0.31 0.00 10.01
ENERGY INCOME AND GROWTH FUND 23.40   0.0 0.00 0.00 9.95
CLEARBRIDGE ENERGY MLP OPPORTUNITY FUND 9.51   0.0 0.00 0.00 9.70
KAYNE ANDERSON MLP INVESTMENT 15.58   0.0 0.00 0.00 9.15
SALIENT MIDSTREAM & MLP FUND 8.70   0.0 0.00 0.00 7.79
KAYNE ANDERSON MIDSTREAM/ENERGY FUND 11.64   0.0 0.00 0.00 7.63
NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND 16.76   0.0 0.00 0.00 7.36
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND 25.84   0.0 0.00 0.00 6.40
ISHARES DOW JONES SELECT DIVIDEND INDEX FUND 100.68   0.0 0.00 3.37 3.34
VANGUARD HIGH DIVIDEND YIELD ETF 88.46   0.0 0.00 0.00 2.84
SPDR S&P DIVIDEND ETF 101.59   0.0 0.00 2.42 2.37
VANGUARD DIVIDEND APPRECIATION ETF 117.91   0.0 0.00 0.00 1.61
ADAMS EXPRESS 15.86   0.0 0.00 0.20 1.26
JPMORGAN ALERIAN MLP INDEX ETN  

FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND - FMO
FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND - FMO  


Older articles featuring Fiduciary/claymore Mlp Opportunity Fund (FMO):
Income Investing And The Changing Yield Curve
The Highest Yield Left In The Market
Closed-End Funds: 12 Funds In The 10%+ Yield Club At A Discount
Closed-End Funds: 12 Funds In The 10%+ Yield Club At A Discount
You Were Warned: MLPs And 'I Bought It For The Dividend'
High Yield For Granny: The Savvy 'Widow & Orphans' Income Factory
High-Yielding And Well-Valued MLP Closed-End Funds, Part 2
High-Yielding And Well-Valued MLP Closed-End Funds, Part 1
Weekly Fund Spotlight: Up To 14% Yields From These MLP CEFs
Dividends By The Numbers In July 2017

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