Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why You Simply Can't Ignore Dividend Stocks in Today's Market

The S&P 500 (SNPINDEX: ^GSPC  ) started out the second quarter by setting an all-time record high, and even after the pullback earlier this month, the index still remains close to its best levels ever. One big reason for that strong performance has come from dividend stocks, which have performed well and given investors the confidence they need to keep the bull market running into a sixth year. As new data from S&P Dow Jones Indices reveals, the first quarter of 2014 was a banner period for dividend stocks, with a record number of companies boosting their payouts to investors.

The latest on dividend growth
The figures from S&P Dow Jones Indices showed a truly staggering number of dividend stocks making increases to their distributions. Fully 1,078 stocks upped their dividends last quarter, toppling a record that had stood for 35 years and representing a 14% increase from last year's first quarter. By contrast, only 102 companies cut or suspended their dividends, which was 27% fewer than in the year-ago quarter.

The amount of money that corporations are paying their shareholders is also stunning. Net dividend increases amounted to $17.8 billion, with first-quarter payouts having jumped 15% from year-ago levels. Moreover, because of the relative weakness in the stock market, the rise in dividend payouts raised the weighted dividend yield of the roughly 10,000 traded stocks that S&P Dow Jones Indices looked at to 2.48%.

What's next for dividends?
Dividends have become almost a required attribute for popular stocks, with 421 of the S&P 500's members paying dividends -- the largest number in more than 15 years. Recently, major companies in the S&P have boosted their payouts, including Procter & Gamble's (NYSE: PG  ) 7% dividend increase earlier this month and a similar 7% boost in the quarterly payout of railroad giant CSX (NYSE: CSX  ) . We're also likely to see some other big boosts in the coming days, as oil giant ExxonMobil (NYSE: XOM  ) typically makes a dividend increase in late April. A big enough increase could make Exxon the biggest dividend payer by total cash distributed in the market.

There are plenty of reasons to stay hopeful about the prospects for even more dividend increases. Payout ratios remained at 36%, falling well below the historical average of 52%. That gives companies more flexibility to raise their dividends even if a future economic downturn temporarily squeezes earnings. Moreover, S&P Dow Jones Indices senior index analyst Howard Silverblatt argued that total increases for 2014 could well set a record, given the quick pace in the first quarter and the track record of many stocks that are likely to boost payouts later in the year.

Investors should continue to look to dividend stocks as a smart way to invest. With their combination of income and growth potential, dividend stocks look especially appealing as investors prepare for more volatile times that could come in the near future.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2920960, ~/Articles/ArticleHandler.aspx, 9/5/2015 1:51:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 4 hours ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 4:30 PM
^GSPC $1921.22 Down -29.91 -1.53%
S&P 500 INDEX CAPS Rating: No stars
CSX $26.85 Down -0.43 -1.58%
CSX CAPS Rating: ****
PG $68.76 Down -1.17 -1.67%
Procter & Gamble CAPS Rating: ****
XOM $72.46 Down -1.33 -1.80%
ExxonMobil Corp CAPS Rating: ****