Dividend Yield or Dividend Growth?

ETF Guy from Exchange Traded Funds (ETF Topics.com) writes a thoughtful article on considering two characteristics of a stock, dividend yield and dividend growth, and which metric to choose for a better investment.

"I'd rather invest for dividend yield over dividend growth but my favorite strategy lies somewhere in the middle. I assume most stocks that operate under a high dividend yield, do so for one of several reasons: The share price has recently dropped (due to bad news? poor outlook?), it might be a risky business, or it could be an old ‘out of favor' cash cow. Either way, I would never invest in a company that isn't solid and at least growing modestly. So that should filter out a bunch of high yield stocks, but not all."

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The Best of the Money (Dividend) Blogs

The globeandmail yesterday released their annual "Best of the Money Blogs" survey to seek out the best online financial blog resources for investors and personal finance junkies. If readers are astute they might find a number of Dividend Addicts in the midst of these highly regarded blogs.

"To track down the best financial blogs the Web has to offer, we asked our Globe bloggers, columnists, the Canadian Capitalist and hedge fund manager Howard Lindzon to share their favourites. Want to let us know what you think? Our online poll below will let you vote for your top picks. And, if you have a name we overlooked, add it to the comments. You can also recommend the sites other readers have added. Without further ado, here's the list..."

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Diageo has Scope to Raise Dividend Further

Garry White of the Telegraph.co.uk writes a column on defensive dividend stock Diageo PLC (DEO) and the prospects of future dividend increases from the company.

"Diageo shares have underperformed other defensives over the past six months, but the company generates good cash flows and its dividend is safe. This has created a buying opportunity....Of course, despite its defensive characteristics, the spirits and beer group has not been immune to the effects of the recession. Destocking has been a major theme – and this has obviously hit sales."

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Dividends Can Prevent Inflation Erosion

Charlie Farrell of moneywatch.com wrote an article recently on dividends and how inflation impacts a portfolio. Because dividends have the potential to grow over time threats of inflation to a portfolio can be partly offset by investing in companies that raise their dividends above inflation.

"Historically, dividend payments have increased as the companies that pay those dividends grow their businesses and their earnings. While past performance is no guarantee of future returns, a reasonable long term estimate for future dividend growth on a diversified portfolio is about five percent per year."

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Dividend Lovers Should Take Note:

John Heinzl of theglobeandmail publishes an article on Canadian dividend stocks addressing the issue of some investors feeling as if they've missed the boat on high dividend yields erased by the market advance.

"True, the stock market has been on steroids since hitting its March lows, but there are still plenty of juicy dividend yields out there. And as the economy gradually recovers, the risk of companies cutting their payouts is fading, removing a key source of worry for income-seeking investors. All of which means that dividend stocks still offer decent value, particularly for long-term investors who can tolerate more short-term volatility."

Dividends Discussed:
- Canadian Banks
- Reitmans
- Bell & Rogers
- Thomson Reuters

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Cheap Utility Stocks

Bloomberg has an article out today discussing global utility stocks and their attractive valuations for dividend oriented investors.

"Power producers are offering the biggest dividends since at least 1995. Payouts by utility companies in the MSCI World account for about 5.17 percent of share prices, almost double the rate at the end of 2007, according to quarterly data compiled by Bloomberg. They have increased per-share dividends every year since 2001, the data show. That’s longer than any industry group except health-care companies, which have a dividend yield that is 43 percent lower. The yield from utilities is also higher than the 3.71 percent yield on 10-year Treasury notes. In the previous 14 years, utilities have paid on average 1.74 percentage points less than government bonds, Bloomberg data show."

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Opportunities in Dividends

Johanna Bennett in Barron's interviews Alan B. Lancz on the recent market rally, investing opportunities and the prospects of dividends discussing investments such as Procter & Gamble (PG), American Water Works (AWK) and Eni SpA.

"Q: Are we in a bear-market rally or a bull-market recovery?
A: Wall Street spends far too much time thinking about that, which is why they missed the severity of the financial crisis. It has been a strong rally with the market bouncing off extreme lows. The financial crisis, for the most part is behind us and there is a light at the end of the tunnel. But we are not out of the woods. The massive government bailouts will have unintended consequences, such as rising interest rates, a rising risk of inflation and a weak U.S. dollar. We can't count on China to lead us out of the recession. Meanwhile, I don't expect to see strong economic growth anytime soon."

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Tough to Nail Down Yield

Keith Woolhouse of The Ottawa Citizen writes a column on the topic of dividend yields and where investors should invest their capital in an environment that doesn't reward you for placing money in savings accounts.

"The choice facing investors at this time is not simply where to invest -- extremely low rates on savings accounts make that decision easy. A greater worry is the overhanging concern that the market has got ahead of itself and a correction may be in the offing, bringing down share prices and raising current yields. But waiting for the market to pull back can prove costly and it hasn't worked, so far, for those still on the sidelines."

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