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.