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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
CLEARBRIDGE ENERGY MLP OPPORTUNITY FUND 8.75   0.0 0.00 0.00 15.59
FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND 10.45   0.0 0.00 0.00 12.57
TORTOISE MLP FUND 14.11   0.0 0.00 0.00 12.31
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPP FUND 5.84   0.0 0.00 0.00 12.13
KAYNE ANDERSON MLP INVESTMENT 15.89   0.0 0.00 0.00 11.55
TORTOISE ENERGY INFRASTRUCTURE 23.89   0.0 0.00 2.62 11.29
CUSHING MLP TOTAL RETURN FUND 9.82   17.8 0.55 0.00 11.25
ENERGY INCOME AND GROWTH FUND 21.05   0.0 0.00 0.00 11.18
KAYNE ANDERSON MIDSTREAM/ENERGY FUND 11.03   0.0 0.00 0.00 11.06
NUVEEN ENERGY MLP TOTAL RETURN FUND 9.22   0.0 0.00 0.00 11.05
FIRST TRUST MLP AND ENERGY INCOME FUND 11.10   35.8 0.31 0.00 11.00
NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND 14.35   0.0 0.00 0.00 9.38
SALIENT MIDSTREAM & MLP FUND 8.87   0.0 0.00 0.00 7.66
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND 21.78   0.0 0.00 0.00 7.52
VANGUARD HIGH DIVIDEND YIELD ETF 80.45   0.0 0.00 0.00 3.69
ISHARES DOW JONES SELECT DIVIDEND INDEX FUND 92.15   0.0 0.00 3.20 3.46
SPDR S&P DIVIDEND ETF 91.44   0.0 0.00 2.44 2.72
VANGUARD DIVIDEND APPRECIATION ETF 99.78   0.0 0.00 0.00 2.30
ADAMS EXPRESS 13.24   0.0 0.00 0.21 1.58
JPMORGAN ALERIAN MLP INDEX ETN  

CLEARBRIDGE ENERGY MLP OPPORTUNITY FUND - EMO
CLEARBRIDGE ENERGY MLP OPPORTUNITY FUND - EMO  


Older articles featuring Clearbridge Energy Mlp Opportunity Fund (EMO):
My Dividend Growth Portfolio Closes Out 2018
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-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
Beyond Dividends: Beating The Market With Shareholder Yield
The Risks Of Focusing Too Much On Dividend Yields
March's Best And Worst 15 CCC Stocks With Market Caps Greater Than $20 Billion And Yield Greater Than 2%

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