Market Pulse: Christmas ‘presents’ for investors
Special to the Bonanza
Investors received a few presents recently. I’m referring to dividend boosts. Just last week 3M Co (MMM) increased its dividend by 20 percent to $1.025, Boeing (BA) raised its dividend by 25 percent to $0.91 per shares, and CVS Health (CVS) announced a 27 percent increase.
Some of my favorite dividend boost stocks are Pfizer and Spectra Energy. There are many more examples.
Historically, dividends account for 43 percent of the stock market’s long-term annual return of around 10 percent.
With the bull market in its sixth year, it’s easy to make a case that dividends will become a more important component in total return as we move forward.
Dividend paying stocks are easy to own, especially those that consistently increase dividends.
Most are from companies that are financially stable and mature, and they are typically less volatile that other stocks. Shareholders can either enjoy the periodic dividends or have them reinvested.
Investors can own their favorite dividend-paying companies or buy a dividend ETF.
Here are two of the latter to consider: The SPDR S&P Dividend ETF (SDY) holds 60 companies from the S&P 1500 that have raised their dividends annually for at least 20 years. Its expense ratio is 0.35 percent.
An alternative is ProShares S&P 500 Aristocrat (NOBL), which holds S&P 500 stocks that have increased dividends annually for at least 25 years. This ETF’s largest holdings are Leggett & Platt Inc., Lowe’s Cos Inc., and PPG Industries.
With few exceptions all of my client stock recommendations have above-average dividend yields and nearly all raise their payouts year after year. Dividends provide more than just walking around money.
Over time, dividends account for close to half of the market’s total return. When you own several of these companies, you’ll be receiving dividend “presents” again and again.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.