After lagging behind for most of this year, dividend-paying stocks are outperforming the market again: On a total-return basis, dividend stocks have bested non-dividend-payers in October and are neck-and-neck so far in November.
"We have turned the corner" on dividend stocks," Howard Silverblatt, senior index analyst at Standard & Poor's told The Wall Street Journal.
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Non-dividend paying stocks have risen 55 percent this year, while stocks that pay dividends have risen only 21.3 percent.
However, over long periods of time, dividend stocks have shown better returns and greater resilience during market slides.
According to Ned Davis Research, companies that began paying or increased dividends have returned 9.5 percent yearly on average since 1972.
In 19 of the past 30 years, S&P data show, dividend-paying shares did better than non-payers.
One reason for the improvement is probably that the large number of companies that cut dividend payouts beginning in late 2008 has dwindled to a handful.
Another is that dividend-paying companies include consumer staples, tobacco, and health care, all of which can hold their own when consumers tend to keep their wallets closed.
For the first time in 70 years, U.S. Treasury bills are paying no interest while stocks continue to appreciate, Bloomberg reports, bringing up the specter of 1938, when the Standard & Poor’s 500 index climbed 25 percent as T-bill rates collapsed from 0.45 percent to 0.05 percent.
As 1939 began, stocks began a three-year, 34 percent decline after the Fed increased borrowing costs prematurely in order to halt inflation that never happened.
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