It's Not Just About Yield

You’ve probably heard the killer dividend pitch plenty of late: “Hey, you can get a higher yield on quality blue chips than on the 10-year Treasury.” In fact, classic dividend-payers such as utilities and telecoms have yields double the 1.99 percent payout on the Treasury note.

Getting all wide-eyed over a stock’s dividend yield, however, misses the bigger picture. “What you are getting paid today in a dividend is not what’s important,” notes George Fraise, manager of the $2.7 trillion Sustainable Growth Advisers, sub-adviser for the John Hancock U.S. Global Leaders fund. “The key to dividend investing is to focus on companies that will be able to grow that dividend payout over time.”

Source: Business Week

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