Why Dividends Matter

My take-away from reviewing these new studies on dividend-focused stock selection is that dividend portfolios are low-Beta value portfolios that also provide income. I, and many other investors, favor dividends for their consistency and predictability. From a total return standpoint, the consistency and predictability manifests in the form of lower total volatility and lower Beta. This does not mean that all investors should be income investors.

In addition, as Larry has pointed out, there are times when dividend strategies get too trendy and overbought. On the other hand, even if dividends are simply a convenient marker for low-Beta value stocks, that's just fine because there is no penalty (e.g., there was zero Alpha) for using this marker to select stocks.

Source: Seeking Alpha

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