Saturday, March 31, 2012
Taking stock of dividend investing
The fact so many investors seek out dividends has been helpful in persuading more companies to return value to shareholders directly through dividends. This is important. Academic research has shown many companies do a poor job of reinvesting their profits, especially if they try to diversify by purchasing other companies in different industries. A 2003 paper in the Financial Analysts Journal (with a refreshingly non-academic title: Surprise! Higher Dividends Higher Earnings Growth) found companies that paid out more of their profits as dividends had higher growth in profits.
This may explain another interesting fact many investors are not aware of: There is a growing body of research showing you can actually beat the broad stock market by investing for dividends. READ MORE