LOCAL ECONOMIC SNAPSHOT | INVESTMENTS

Dividends still a popular option

By WILL DEENER
Special Contributor wwrdeener@aol.com

KYLE ALCOTT
Staff Artist kalcott@dallasnews.com

Investors are continually looking for ways to increase their income, particularly the 78 million soon-to-be-retiring baby boomers. Thats why cash paid to company shareholders in the form of dividends is becoming an increasingly popular way to supplement income. While two vicious bear markets in the past decade have turned many investors against stocks, companies that pay consistent dividends remain attractive to many investors.

Biggest U.S. dividend payers

The following companies are the largest dividend payers by dollar amount. The dividend yield is calculated by dividing the amount of dividend paid per share by the stock price. The annual dividend yield of the S&P 500 is currently 2.2 percent. AMOUNT PAID COMPANY
(In billions)

Dividend yield by industry sector

While about three-fourths of the companies in the Standard & Poors 500 Index pay dividends, the amount varies widely. INDUSTRY Telecommunications Utilities Consumer staples Industrials Health care Materials Energy Financials Consumer discretionary Information technology DIVIDEND YIELDS 5.3% 4% 2.9% 2.5% 2.4% 2.3% 2% 1.8% 1.7% 1.2%

DIVIDEND YIELD

AT&T Exxon Mobil General Electric Pzer Microsoft Chevron Johnson & Johnson Procter & Gamble Verizon Philip Morris Merck Wal-Mart Intel Coca-Cola JP Morgan Chase IBM ConocoPhillips Altria Group PepsiCo Abbott Labs 7.2 6.8 6.7 6.5 6.2 5.8 5.7 5.4 5.1 5 4.3 4.3 3.8 3.5 3.5 3.4 3.2 3 9

$10.4

5.8% 2.2% 3.8% 4.1% 3.1% 3% 3.5% 3.1% 5% 3.9% 4.5% 2.4% 3.4% 2.7% 3% 1.6% 3.6% 5.5% 3.1% 3.4%

Highest dividend payers in Texas

Investors looking for consistent dividend-paying stocks have a broad variety of companies to choose from in Dallas-Fort Worth and throughout the state. The dividend yields of some of the most well-known Texas companies: COMPANY AT&T RadioShack Cinemark Waste Management Atmos Energy Kimberly-Clark ConocoPhillips Ashford Hospitality Sysco Cullen/Frost Bankers DIVIDEND YIELDS 5.8% 5.4% 4.4% 4.3% 4.2% 3.8% 3.6% 3.7% 3.6% 3.5%

Higher yields in our backyard

Dallas-Fort Worth companies, on average, pay a higher dividend yield than companies do nationally. This chart shows the dividend yield for Dallas-Fort Worth companies vs. the Standard & Poors 500 and the Russell 5000 over 15 years.
4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Russell 5000 S&P 500 Bloomberg DFW Index

1.61% 2.14%

1.55%

SOURCES: Morningstar; Bloomberg News

The bottom line

Savvy investors are moving toward dividend-paying stocks because they want the income, but its more than that. The stock price of a company that pays a consistent dividend over many years is not as volatile. The dividend works like an anchor. The stock price may not go up as much in good times, but it doesnt go down as much in bad times. Howard Silverblatt, senior index analyst at Standard & Poors The farther out I look, the better the story looks for high dividend-paying stocks. They are the ones that people want to own if they are going to be able to pay their bills in retirement. It is just not that complicated. You cant get a decent yield from U.S. Treasuries or most corporate bonds, and ination still exists so there is no real return there. Its nice to see investors embracing dividend-paying stocks again. Historically, dividends have accounted for more than half of the stock markets annual returns. Dividends fell out of favor during the technology bubble of the late 1990s, but now investors are scrambling to nd good, consistent dividend payers.

Josh Peters, director of equity income strategy at Morningstar

Will Deener, special contributor, The Dallas Morning News