Stocks With 'Net Payouts' of 8%

Dividends are sometimes eliminated here or reduced there, but mostly they continue rolling in. The long history of stock returns shows that steady dividends matter more than dramatic price changes. In a 2002 study published in Financial Analysts Journal, money managers Robert Arnott and Peter Bernstein showed that $100 invested in U.S. shares in 1802 grew over the next two centuries to $37 million after inflation if dividends were reinvested, but just $2,099 if dividends were spent.

Share repurchases are valuable to investors, but they don't actually put cash in anyone's pockets, so those living on investment income should consider whether dividend yields alone on these stocks are high enough (unless they wish to periodically sell shares). Second, although companies usually state their dividend rates ahead of time, they spend on repurchases according to their cash flow. The recent recession showed that in a severe crunch, dividends prove much stickier than repurchases. From peak to trough over the past three years, dividend spending for S&P 500 companies declined 17%, mostly because of cuts at a handful of giant banks that weigh heavily in the index. Repurchase spending, however, plunged by more than 85%. So consider dividends the dependable portion of the yields below, and repurchases a welcome extra.

Source: SmartMoney

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