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Dividends Out of Favor in 2012

In the last few years, dividends have garnered significant admiration.  In fact, many investors have begun to wonder whether they can count on price returns via P/E expansion or earnings growth at all.  If you only experienced the price return of the S&P 500 since the turn of the century through April 30, 2012, you would be down about 5%.  Thanks to dividends you are up nearly 20%.  If you had focused on high dividend payers such as the utility subsector of the S&P 500 or MLP’s through the Alerian MLP index, you would be up a whopping 103% and 824% respectively!

This story is highly reversed in 2012 as we have seen beta in play while the dividend payers are left behind:

A large part of the theme in 2012 has been driven by rising financial stocks with the financial sector up nearly 20%.  The real question is whether this euphoria can persist for the remainder of the year.  I have a feeling that Europe will continue to throw waves across the pond.  In addition, it is nearly a foregone conclusion that the United States will have another debt ceiling debate by the end of August. Election year or not, negative news events seem likely. The 4% yield on utility stocks might seem attractive once again.

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Continuing the Discussion

  1. Wednesday 7atSeven: on the road | Abnormal Returns linked to this post on May 2, 2012

    […] Utilities have rallied back to new highs.  (Dragonfly Capital also SurlyTrader) […]



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