Less-Volatile Stocks for a Volatile World
Then there's income. Utility-type companies typically throw off cash in the form of dividends. For instance, venerable AT&T now has a dividend of approximately 5.3%. Portland General Electric (POR) currently has a 3.9% dividend. Dividends can and do make a material contribution to an investor's total return.
But there's another element to dividends that investors often don't consider: growth. That is, some companies have proven to be particularly adept at consistently raising their dividends, which over the long haul, can have a positive impact on investor returns. For instance, Aqua America (WTR) , which is in the Utility Bills motif, has doubled it's dividend over the last 10 years, from 32 cents per share in 2002 to the current annualized dividend of 70 cents. In less than five years, Comcast has nearly quadrupled its dividend, from 18 cents per share to the current 65 cents.
With 10-year Treasuries paying less than 2%, dividends of 3% to 5% can look very attractive, even though the stocks that pay them carry more risk. This theme may sound redundant because it has been in favor the last few years.
Many investors who are worried about dividends and a change in tax code, have been selling dividend stocks anticipating the strategy is played out. I don't believe so. Of course, if taxes on dividends go up and continue to be assaulted by Washington politics, these stocks could be exposed to downward pressure. I would suggest, however, to buy on weakness. Over the past 12 months, the stocks in the Utility Bill motif returned 26.1%.
So go ahead. Let the world gyrate around you. When you finally get home to your oasis of peace, remember that the boring and predictable stuff can make for a great addition to you investment mix.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.