CHICAGO, Sept 9 (Reuters) – With all the angst in the market
lately about rising rates bruising bond prices, where can you
find reasonable income with less sensitivity to interest-rate
The answer, surprisingly enough, is dividend-growing stocks.
These cash-rich companies not only have the ability to raise
payouts but their returns are still competitive with bonds in a
Dividend growers can offer better performance than bonds
because total return rises as the dividend yield is increased.
(Total return is a stock’s appreciation plus reinvestment of
dividends and capital gains before taxes.)
C. Thomas Howard, an emeritus professor of finance at the
University of Denver, found that annual returns of stocks in the
Standard & Poor’s 500-stock index rose from 0.22 percent (for
large companies) to 0.46 percent (small companies) for every
percentage-point hike in yield from 1973-2010.
When Howard compared dividend growers with companies that
cut payouts, the difference was even more pronounced. He
discovered that dividend raisers outperformed dividend cutters
by 10 percentage points, on average, during that period.