The Dividend Dilemma

Once the domain of grandmothers waiting for a quarterly check from their local utility, dividends have become very appealing in the wake of a choppy decade for stock markets. Dividend-paying stocks reward investors whether the market goes up or down, a fact which boosted their popularity in 2011. Equity-income funds were the top diversified equity performers in 2011, up almost three percent for the year, according to fund research firm Lipper, a Thomson Reuters company. But that popularity, ironically, could also be a problem.

"Dividend stocks have had a great run," says Charlie Dreifus, senior portfolio manager of New York City-based The Royce Funds. "Has it become a crowded and overvalued space? Maybe." Companies jumping on the dividend bandwagon include Apple Inc, which, after years of rebuffing income-hungry shareholders, said recently it will award a quarterly dividend of $2.65 per share beginning in July. Goldman Sachs Group Inc recently hiked its dividend for the first time in six years, by almost a third, making for a yield of roughly 1.6 percent.

Source: Reuters


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