Last month, in the midst of the market panic, I wrote about these 10 outstanding dividend stocks:
Dividend-Adjusted Return Since Aug. 2, 2011
|Utilities||Southern Company (NYSE: SO )||5%||2%|
|Utilities||Waste Management (NYSE: WM )||4%||1%|
|Mortgage REITs||Annaly Capital (NYSE: NLY )||15%||2%|
|Mortgage REITs||Chimera (NYSE: CIM )||18%||(6%)|
|Mortgage REITs||Crexus (NYSE: CXS )||12%||(10%)|
|Luxury||Pebblebrook Hotel (NYSE: PEB )||3%||(14%)|
|Luxury||Coach (NYSE: COH )||2%||(5%)|
|Multinational||Intel (Nasdaq: INTC )||4%||(5%)|
|Multinational||Philip Morris (NYSE: PM )||4%||(5%)|
|Multinational||Coca-Cola (NYSE: KO )||3%||4%|
|Versus S&P 500||+5.1 percentage points||(0.1%)|
* Data from Capital IQ, a division of Standard & Poor's.
Why these names? The biggest problem facing the U.S. economy is weak consumer spending. Households have high levels of debt they're still trying to pay off, and people are feeling insecure about their jobs or have already been laid off. Under these circumstances, it's easy to see why they're not spending. And when no one's buying goods and services, companies have more capacity to produce than demand for their products, so they have no reason to hire people.
It's a vicious cycle -- one that probably won't be cured for a long time unless we experience a new technology boom spurring business investment, a surge in exports, or additional stimulus spending to boost demand.
Dividend stocks have been shown to outperform non-dividend payers, especially in bear markets. And there are particular reasons to think these categories of stocks will do well, too: Utilities provide a necessity product and tend to do well in periods of low inflation, mortgage REITs are enjoying strong profit spreads in the current interest-rate environment, luxury goods makers should do well as the wealthy continue to accumulate a greater and greater proportion of our nation's wealth, and multinationals can support domestic revenue with sales from emerging markets.
How're we doing?
It's been a rough month, with the S&P falling some 3.5%. The 10 stocks performed about in line with the market over that time frame. Over time, I expect them to outperform -- particularly if a weak stock market persists.
Here's the recent news:
- Coach and Waste Management went ex-dividend on Sept. 1. They'll pay out $0.23 and $0.34 per share, which equates to 0.4% and 1.1% of current share prices, respectively.
- Coca-Cola will go ex-dividend on Sept. 13. It'll pay out $0.47 per share, or 0.7% of its current price.
Foolish bottom line
The current economic environment may be a difficult one for many companies, but the dividend-payers I've discussed here are have protection from these challenges, and, in some cases, could actually benefit from them.