Dividend Champs and Longevity
Several times a year we like to showcase a few of our stocks with compelling increases in their dividend. Concurrently, while sharing three of these companies with you today, we want to remind you about the importance of focusing on dividend paying stocks.
Larry Fink, CEO of BlackRock (asset management company spinoff from Merrill Lynch), was recently interviewed by CNBC www.cnbc.com
The topic of conversation was longevity and the fact that because people are living longer, we need our money to last longer. Longevity is the defining challenge of our age, according to Fink.
Back in the late 90s many predicted that baby boomers were going to flee stocks for the safety of bonds as they neared retirement. And in fact many investors did flee stocks for the safety of bonds, but for fear of another financial crisis. Bonds did not offer attractive returns for retirement but investors were (and still are) happy to park their money there, despite the low returns, for safety’s sake.
“The traditional mix of retirement funding from Social Security, pensions and personal savings is in the grip of a systemic crisis that is threatening not only retirement systems, but also our economic futures,” says Fink.
He points out that investing in long bonds at a 3% interest rate, with no bond appreciation, will push more people into the equity markets as they attempt to generate enough savings for retirement. Dividend stocks in particular will be very important going forward, not only because they offer the potential for stock appreciation, but the dividend itself also increases. During those years that stocks are not doing well, investors will still benefit from the cash flow of the dividend. According to Fink, “This is a very large secular change and we’re just beginning to see that people are going to become heavily more invested in equitiies.”
Here are our three Dividend Champs for May 2013:
1. International Business Machine, IBM ($204.47, yield 1.9%) increased the dividend 11.7% from $.85 to $.95. They have a 5 year dividend growth rate of 14% and the stock has appreciated 64.6% over 5 years.
2. Qualcomm, QCOM ($64.64, yield 2.2%) increased the dividend 40% from $.25 to $.35. They have a 5 year dividend growth rate of 12% and the stock has appreciated 35.3% over 5 years.
3. Chevron, CVX ($123.23, yield 3.2%) increased the dividend 11% from $.90 to $1.00. They have a 5 year dividend growth rate of 9% and the stock has appreciated 22.3% over 5 years.