The Rush To Dividend-Paying Stocks Is Justified

I've been worried about a trend for the last three years. With interest rates at all-time lows, investors have gone crazy for stocks with high dividends, since it's one of the last holdouts of good yields. That, I've proposed a few times, might be setting up something akin to a dividend bubble (although I hate using that word). But the more I look at the data, the more skeptical I am of that view.

Yes, a few companies have seen their yields plunge as valuations are bid up. But that narrative isn't as systemic as I thought. Take the top 10 non-financial companies in the Vanguard High-Yield Index -- a proxy for the most popular dividend stocks. While the 10 stocks have performed well over the last three years, beating the S&P 500 by more than 10 percentage points, the average dividend yield of the group has barely moved at all. But for now, the bottom line is that the rush toward dividend-paying stocks may be more justified than some (including me) once thought.

Source: Motley Fool

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