Soaring technology stocks led the longest bull market in history during the 1990s, driving investors to shun stocks of dividend-paying firms.
The steady stock performance of more conservative firms just seemed pale in comparison. But now, rising interest rates and slowing corporate earnings are causing investors to again turn to the tried-and-true: high-quality firms with strong cash flows, solid earnings and a healthy dividend stream.
Companies that can commit to paying a regular dividend are ones that generally are fundamentally strong and optimistic about their future. A company’s dividend history is a good indication of its willingness to share profits and demonstrate accountability to investors. In periods of market uncertainty, these qualities become especially appealing to investors.
Stocks of companies that pay dividends generally have less price fluctuation than stocks of non-dividend payers. The dividend can create a cushion and smooth out a stock’s price volatility. It’s important to remember, however, that although dividend-paying stocks can add diversification to your portfolio and help minimize volatility, they still involve...
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