Dividend Stocks Offering More Than Just Dividends

Once upon a time, high- dividend stocks tended to trade at discounts to the rest of the market. Today? No such luck. In a recent piece for his blog, "The Investor's Field Guide", Patrick O'Shaughnessy provided data showing that high-dividend-yield stocks did at one time enjoy a valuation advantage over other stocks. "[But] their valuation advantage has collapsed," he wrote. Prior to 2009 -- when the bear market bottomed -- higher yielders (stocks with dividends over 4%) were cheaper than those with yield in the 2-4% range 92% of the time, O'Shaughnessy says. Since then, they've been cheaper just 30% of the time.

What gives? O'Shaughnessy offers a very plausible theory: "This is impossible to confirm, but the easiest explanation is that investors (especially older ones) have needed more income in this low rate environment, and have bid up the valuations of high yielders," he says. Here are some of the best of the bunch: Douglas Dynamics (PLOW), Taiwan Semiconductor Manufacturing (TSM), Johnson & Johnson (JNJ) and Maiden Holdings (MHLD).

Source: NASDAQ

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