I am a fan of stocks that consistently pay dividends, but even I was surprised by a chart (below) that I just ran across from iShares / BlackRock. In an article on dividend-paying stocks in October 2010, there is a chart showing that the average dividend-paying stock in the S&P500 has massively out-performed the average S&P500 stock, going back to the early 1970’s. It is also striking that this out-performance is a long-term phenomenon. Even during the go-go 1990’s bull market for growth stocks and tech stocks, the cumulative out-performance of the dividend stocks held up. Continue reading
I just ran across an article that Kapitall has on SeekingAlpha that posits an interesting and, I believe, useful way to screen for dividend paying stocks. The basic idea is to look for high-yield stocks that also have a high level of open interest in call options vs. put options.
What does this indicator mean? In theory, people buy call options when they believe that a stock is likely to go up and they buy put options when they believe a stock is likely to decline. The premise in the Kapitall article is to look for stocks with high yields that also appear likely to go up according to the open interest on puts vs. calls. So, these stocks seem like they are likely to be winners on the perspective of yield and price appreciation.
From my perspective, the story looks a little more nuanced. Continue reading