Misunderstood Dividend Stocks

I’ve written before about the power of fat dividends to crush the market, and I’ve discussed five special dividend stocks that are poised to rapidly increase their payouts. But it not only feels good to invest in high-yielding dividend stocks for current income -- it’s a viable long-term strategy, too. And the situation is even better if you can find stocks that are mispriced because investors do not fully understand them, so that their yields are even higher than they otherwise would be.

Ask the good folks at Tweedy, Browne. They reviewed the academic and professional research and concluded that high yields lead to attractive returns over long periods. Dividend stocks also provide decreased volatility and more downside protection. Good news for those of us (like me) who invest in such stocks. I’ve shown elsewhere that if you’re investing for yield, it makes a lot of sense go with a higher yield over faster-growing but lower-yielding dividend payers. That high yield gives you a great head start. In fact, it can take a decade or two for even the fastest-growing dividend stalwarts to catch just a reasonably growing high yielder.

Source: Motley Fool

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