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Power Dividends Rule the Day on Wall Street

Wall Street is back on its feet again today, though the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has only gained back about 43 points of the 326 it lost yesterday. The recovery isn't driven by anything specific; outside of the Congressional Budget Office announcing that the fiscal 2014 budget deficit is being revised down about $46 billion to $514 billion, there isn't a whole lot of economic news for investors today.  

What's interesting about the move today is that major dividend stocks are wildly outperforming the market. In 2013, it was growth stocks that enamored investors, but so far this year value has taken center stage.

The Dow's top stocks
Among today's Dow leaders are DuPont (NYSE: DD  ) , Pfizer (NYSE: PFE  ) , and 3M (NYSE: MMM  ) , with respective gains of 2.3%, 2.3%, and 2%. What these companies have in common is strong dividends. DuPont and 3M yield 3% and 2.7%, respectively, and have histories of  paying investors dividends that are measured in decades. With uncertainty in emerging markets and questions about whether growth stocks are a good value, it's no surprise that money is flocking to these stocks.

Pfizer yields 3.4% and is helped today by good results in clinical testing for breast cancer treatment palbociclib. The stock is also riding the wave of an upgrade by Jefferies, which thinks the cancer treatment could be a game changer.  

This could be called a "risk off" situation, but it just means investors are seeking value in stocks as opposed to paying a premium for growth potential, as was the theme last year.

We don't know if the theme of the day will continue for long, but it's a time to consider that there are some incredible values on the market that don't require the same risk as growth stocks. DuPont, Pfizer, and 3M are all solid dividend payers with relatively low P/E ratios; in a market where value is hard to find, they're great picks.

Dividends can be a great way to beat the market
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

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  • Report this Comment On February 04, 2014, at 4:42 PM, funfundvierzig wrote:

    Other than a dividend yield approaching 3%, 3M Corp has little in common with the shrinking DuPont Company.

    For the past 15 years, DuPont has raised its quarterly dividend by only a dime, 10 cents from 35 cents to 45 cents in four small steps. That doesn't even keep pace with inflation.

    In sharp contrast, 3M Corp has shown a dividend increase in each and every year for the past 15 years. The quarterly MMM dividend has jumped impressively from 27.5 cents to 63.5 cents, greatly exceeding inflation.

    For many investors, consistent and robust dividend growth is more important than the yield itself.


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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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Related Tickers

9/1/2015 4:35 PM
^DJI $16058.35 Down -469.68 -2.84%
DD $50.02 Down -1.48 -2.87%
E.I. du Pont de Ne… CAPS Rating: ****
MMM $138.50 Down -3.64 -2.56%
3M CAPS Rating: ****
PFE $31.36 Down -0.86 -2.67%
Pfizer CAPS Rating: ****