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10 Incredible Dividend Facts You Probably Didn't Know

Dividend-paying stocks are everywhere today, but if we've learned anything as investors, it's that no two dividend stocks are ever alike.

Conjured up by businesses early on in the stock market's existence, dividends were a way to reward shareholders for sticking with a company by sharing profits with them on a quarterly, semiannual, or annual basis. Whether you realize it or not, dividend income has been a steady source of investment growth for generations of investors.

Today, I'd like to share you with you 10 dividend facts that I've come across through my own personal research that demonstrate the power, growth potential, and also dangers associated with investing in dividend-paying stocks.

Source: Andrew Magill, Flickr.

1. Apple  (NASDAQ: AAPL  ) , which holds the record for the highest market valuation in history, only began paying a dividend in August of last year after a 17-year dividend hiatus, but it is expected to pay out $11.08 billion in dividends over the next four quarters -- assuming it keeps its dividend steady. To put that all-time record annual payout into another perspective, Apple's annual payout is higher than the current market cap of 176 of the S&P's 500 components. In one year, Apple will give out more cash to shareholders than Best Buy, Southwest Airlines, or Alcoa is currently worth!

2. There are few things that income-seeking investors like more than buying into companies that have paid a dividend for decades or longer. The reason is that a steady history of payouts often establishes to investors the health of a business model. Only a handful of currently traded companies have paid out dividends for longer than 100 years,and I can find no company that has paid dividends in a concurrent manner for longer than the Bank of Montreal (NYSE: BMO  ) , which has been divvying out dividend payments since 1829! 

3. Sticking with the theme of longevity, dividend investors also love a company that has a history of boosting its dividend. Only a handful of companies are elite enough to join what's referred to as the Dividend Aristocrats club -- those companies that have raised their dividend for 25 or more consecutive years. No company, though, is more elite than ATM and security systems manufacturer Diebold (NYSE: DBD  ) , which earlier this year increased its dividend for a record 60th consecutive year.

4. With interest rates at arguably the lowest levels on record, the thirst for high-yield investments has boiled over since the recession into the mortgage-REIT sector, which has thrived on low lending rates. Over the past four years, agency-only mREIT American Capital Agency (NASDAQ: AGNC  ) frequently yielded close to 20%. But what I find truly incredible is that if you add up American Capital's dividend distributions over the past 20 quarters (five years), it comes out to $25.85 per share. With the stock valued at only $22.51 per share as of yesterday's close, shareholders have been given a 115% dividend payback just since the summer of 2008.

5. However, smart dividend investors know that it's not always about chasing the highest-yielding stocks. In fact, that strategy can often backfire in a big way because high-yielding stocks can sometimes mask low return on equity or a lack of long-term strategy with those hefty dividends. According to CBS MoneyWatch, over the past 60 years, the worst one-year, two-year, and three-year returns for strategies that involved buying solely high-yield stocks resulted in losses of 36.3%, 39.7%, and 33.6%, respectively. Comparatively, for five-year U.S. Treasuries over the same three time periods during the past 60 years, the worst returns were negative 5.1%, negative 1.7%, and positive 1.6%. If anything, this demonstrates once and for all that yield isn't everything.

6. Dividend payouts today are certainly a lot different than they were at the beginning of last century. As Foolish macroeconomic guru Morgan Housel has noted on multiple occasions, dividend payout ratios today are considerably lower now than they were during the higher-growth periods of the early 1900s. The difference in yield between the two periods within the broad-based S&P 500 as calculated by Robert Shiller is undeniable.

Source: Robert Shiller, Irrational Exuberance

In 2000, when the dot-com bubble burst, the S&P 500's yield amounted to just 1.16%. By contrast, in 1932 during the Great Depression, the yield on the S&P 500 jumped to a whopping 9.52%! 

7. Dividends have historically played a gigantic role in creating wealth for investors in the United States. In Susanna Kim's owns words from an ABC News report, "Of the S&P 500′s nominal total return from 1910 to 2010, dividend yield and dividend growth comprised 90 percent [of] returns for stock holders." I've certainly come across differing figures in other reports, but the message is the same: Compounding long-term dividend growth is a key driver of wealth appreciation.

8. Despite what might seem like relatively low yields and a modest payout ratio compared to the early 1900s, a rebounding U.S. economy compounded with the possibility of higher dividend taxes in 2013 created the perfect storm for big corporate dividend payouts in 2012. In fact, not accounting for inflation, last August saw U.S. companies pay out an all-time record $34 billion in cash stipends, according to Barron's. There's likely a higher figure out there if adjusted for inflation, but $34 billion is certainly nothing to sneeze at.

9. Dividend breadth -- the difference between the number of positive dividend actions in a given year as compared to negative dividend actions -- tends to be at its highest immediately following a recession (i.e., the recovery period). According to data from S&P Indices since 1999, dividend breadth hit a low in 2009 of 1.48 when 1,191 companies boosted their dividend and more than 800 reduced their payout. On the other end of the spectrum, 2004 saw dividend breadth hit a high of 37.06. Coming out of the dot-com bubble, 2,298 companies raised their dividend while just 62 saw their payouts fall that year. This may offer even more proof that long-term investing works, because those investors who attempt to try to time the market would likely miss out on the gains associated with these dividend hikes so shortly after the recession.

10. Last, but certainly not least, the effective tax rate on corporate dividends around the globe is about as wide-ranging a figure as you'll find anywhere. Among G-10 countries, Japan offers the lowest dividend tax rate of just 10%, while France taxes payouts the hardest at roughly 40%. If you're looking for a true dividend safe haven, look no further than Iran. No, your eyes aren't deceiving you, I really did say Iran. Iran does not tax dividend income, and only within the past three years began taxing capital gains. 

Ultimately, what we've seen from these astounding facts is that dividend stocks can make you rich, as long as you know what to look for. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Read/Post Comments (9) | Recommend This Article (40)

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.

  • Report this Comment On August 08, 2013, at 12:58 PM, kankemike wrote:

    Long AGNC

  • Report this Comment On August 10, 2013, at 1:56 PM, drstocks1 wrote:

    interesting piece, unfortunately when you click for info you get a half hour sales pitch and are never given the name of the company. My time is too valuable for come on scams.

  • Report this Comment On August 10, 2013, at 3:56 PM, coloradofarmer wrote:

    Apple " is expected to pay out $11.08 billion in dividends over the next four quarters"


    "last August saw U.S. companies pay out an all-time record $34 billion in cash stipends"

    So... Apple is paying out in 12 months an amount that is 1/3 of the amount of ALL US companies in one month.


  • Report this Comment On August 10, 2013, at 8:11 PM, Poleet wrote:

    I come from a background in real estate investing, and have made a considerable amount in owning properties as rentals. I get a whooping dividend each month in cash, and I can touch and feel my asset, and protect its worth (for the most part).

    Looking at these stocks over the past 6 months, it makes no sense to me as an investor how some of the stocks are soaring in prices, and yet the company is making NO MONEY. However, the companies that I invested in who are actually making money, F, for example, are stuck on stuck as far as price is concerned.

    Honestly, I am thinking of just pulling my money out of the stock market and buying more rental units. Odds are that my houses will be there 50 years from now, where the rent will probably be much higher. I have no idea where the stock market is going to be, as it does not move on actual value of companies, but from my observation is nothing more than a needlessly complex popularity complex.

    If you want to make money, real I am rich and quit work money, you need to invest in a popular stock, not necessarily one with solid financials or fundamentals. This makes the market seem more like gambling to me, and seems inherently risky and unstable.

    JMHO, but I have done very well in real estate, and my cash has made me much more in the shape of a house than it ever did in the form of a stock.

  • Report this Comment On August 10, 2013, at 10:37 PM, NickD wrote:

    I made alot of money just buying PG stock over and over.

  • Report this Comment On August 10, 2013, at 11:52 PM, JungleGent wrote:

    @Poleet: I have been working full-time in the real estate industry for 15 years. I've also been investing in the stock market for about 20 years. I'm glad to hear that you've done well in real estate. Many people didn't. My dad lost his whole fortune of over a million in real estate. Of course, many people have also lost their fortunes in the stock market as well. Investing, whether you choose real estate or stock, can be a gamble if you just blindly follow the crowd. But if you take a bit of time to learn the right way to do it, and have the discipline to follow it, then both real estate and stock investing can reward you very richly in the long run.

  • Report this Comment On August 11, 2013, at 4:21 PM, mikecart1 wrote:

    11) Probably most important.... Dividends are NOT JUST FOR OLD PEOPLE or RETIREES! I come across way too many young people or those entering the workforce that look past stocks with 4-5% dividend just because they aren't in 'style' or 'mainstream' or are boring with share prices that grow at a snails pace of 10% or less annually (yeah I know right...).

    Simple math would show that these 'boring companies' that give 4-5% dividends annually when reinvested along with a stock that may go up and down annually but trends at a 10% or less pace on an annual basis every decade, would have them retiring far earlier than they ever could dream.

    I don't need a pay raise, I give myself my own with dividends baby!!!

  • Report this Comment On August 11, 2013, at 10:43 PM, physicsisphun wrote:

    There appears to be an error in the definition of "dividend breadth." This article states it is the "difference" between the number of positive dividend actions and the number of negative ones. But the examples given suggest that perhaps what you actually meant is that it is the "ratio" between these two values. Care to comment?

  • Report this Comment On August 12, 2013, at 6:54 AM, oceaqua wrote:

    If you want a good example of tax haven for stock gains, cite Hong Kong. It does not tax capital gains or dividends. It only charges a minimal stamp duty for transaction.

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9/27/2016 4:00 PM
AAPL $113.09 Up +0.21 +0.19%
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BMO $64.93 Up +0.32 +0.50%
Bank of Montreal CAPS Rating: ***
DBD $25.27 Down -0.33 -1.29%
Diebold CAPS Rating: **