WSJ: Dividend Stock Funds Top Performance Charts

Friday, 07 Oct 2011 12:00 AM

By Dan Weil

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With interest rates at record lows, investors are looking at assets other than bonds to provide them with meaningful income. They are turning their eyes to dividend stocks, The Wall Street Journal reports.

That view is validated by Morningstar research concerning the performance of large-cap value stock mutual funds.

For the past year, the top 25 percent of funds in that category produced an average dividend yield of 4 percent, handily beating the 2.3 percent yield of the Standard & Poor’s 500 Index. The bottom 25 percent of funds had an average yield of zero.

Many investment gurus preach the value of blue-chip dividend stocks. The University of Pennsylvania’s Jeremy Siegel says dividends, including reinvestment, account for 97 percent of historical stock returns.

Dividend stocks fell out of favor during the stock market boom that began in the 1980s and ended in 2007. But in the low interest rate environment that has accompanied the aftermath of the 2008-09 financial crisis, dividend stocks have regained their appeal.

And many look for the strength to continue. "What happened over 30 years doesn't reverse over 30 days," Daniel Peris, manager of Federated’s dividend fund, tells The Journal.

Forbes recently listed five big, safe stocks likely to raise their dividends, courtesy of Wayne Thorp, editor of the American Association of Individual Investor’s Computerized Investing. The five are Cliffs Natural Resources, Copa Holdings, Altera, Ross Stores, and Joy Global.

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