Fully agree that the best investments are those with stable, growing dividends. I still own stocks purchased several decades ago that have paid a stream of dividends whose total has greatly exceeded their initial purchase price, not to mention that their value has appreciated as well.
However, many of the names listed above have unsustainable dividend payout ratios, and the last thing any investor needs is to buy a stock because of its high dividend, only to find that dividend decimated, followed shortly thereafter by the stock price tanking. As one example, the list includes AEP, which used to pay over $2.5 in annual dividends and trade for $40 many years ago, and now it pays $1.64 and trades for $30. Another example is Goodyear Tire (GT), which many years ago paid a handsome dividend and traded in the 30's, now it pays no dividend and trades in the teens, and the list of such situations is long and ugly.
The trick is guessing which of the issues listed in the table will lead to similar dead-ends, so buyer beware, and remember that the market is discounting these issues for a reason.
Barron's: Best Dividend Plays for 2009 [View article]
Do you really think the WHR dividend is "reasonably secure"!? How about the pharmas? PFE just halved theirs, so how can you be sure that BMY or MRK or others will not? How about tobacco, where we have glimpses of potential new litigation? You already mentioned that T and VZ may be at risk due to high payout ratios, so I will not add them here.
Bottom line is that very few are "reasonably secure". Even those that should be, really are not, since crony boards prefer to cut dividends before they touch executive compensation. After all, the recent business model has become that the real owners of a company, the shareholders, always get short shrift, while their employees (the management) busily reward themselves with the shareholders' money. This sorry state of affairs is an additional discount factor you have to apply when investing in dividend stocks.
5%+ Dividend Yields in the S&P 500 [View article]
However, many of the names listed above have unsustainable dividend payout ratios, and the last thing any investor needs is to buy a stock because of its high dividend, only to find that dividend decimated, followed shortly thereafter by the stock price tanking. As one example, the list includes AEP, which used to pay over $2.5 in annual dividends and trade for $40 many years ago, and now it pays $1.64 and trades for $30. Another example is Goodyear Tire (GT), which many years ago paid a handsome dividend and traded in the 30's, now it pays no dividend and trades in the teens, and the list of such situations is long and ugly.
The trick is guessing which of the issues listed in the table will lead to similar dead-ends, so buyer beware, and remember that the market is discounting these issues for a reason.
Barron's: Best Dividend Plays for 2009 [View article]
Bottom line is that very few are "reasonably secure". Even those that should be, really are not, since crony boards prefer to cut dividends before they touch executive compensation. After all, the recent business model has become that the real owners of a company, the shareholders, always get short shrift, while their employees (the management) busily reward themselves with the shareholders' money. This sorry state of affairs is an additional discount factor you have to apply when investing in dividend stocks.