Financial news commentary continues to tout the power of dividend investing, and anyone with a calculator can easily see the power of dividends across the long term. Income investing doesn’t really need any advocates right now.
But even those who already are sold on the power of dividends should take particular note of income investments in 2012. Because this could be a banner year for dividend increases and dividend stocks.
For starters, companies that hunkered down during the recession are stable enough to start thinking about significant dividend hikes. This trend already is under way — just take a look at the weekly InvestorPlace.com column by Jim Woods that focuses on dividend increases to see some very impressive boosts.
Some recent examples of dividend payout improvements:
- Williams-Sonoma (NYSE:WSM) saw a 29% increase in its quarterly payout.
- REIT Developers Diversified Realty (NYSE:DDR) raised its dividend by 50%.
- Retailer Macy’s (NYSE:M) really upped the ante by doubling its dividend.
Clearly, companies in all sectors of the economy are giving more back to shareholders in the form of bigger dividends.
Don’t think it’s all altruism, however. A recent interview in The New York Times indicated that CEOs are coming around to dividends only because shareholders are demanding them so fervently.
“The idea is beginning to percolate a little bit in management suites that paying a bit higher percentage of your earnings in dividends might be a way to a higher stock price and better benefits for shareholders over all,” one portfolio manager told the Times.
The report goes on to say that companies listed in the S&P 500 Index paid $240.6 billion in dividends in 2011 — up from $205 billion in 2010 and the largest payday since pre-recession numbers in 2008.
REITs, utility stocks, tobacco stocks and major telecoms are typical dividend stocks for those chasing yields. After all, it’s hard to compete with the dividends of almost 6% offered by behemoths like Altria (NYSE:MO) or AT&T (NYSE:T).
But banks are looking to get back into the action too, especially after the Federal Reserve signed off on significant boosts for some financial stocks in 2011. JPMorgan Chase (NYSE:JPM), for instance, is offering a healthy 25-cent quarterly payday for a current yield of 2.8%. Also, tech stocks like Microsoft (NASDAQ:MSFT) are looking to appeal to income-sensitive shareholders as businesses mature and growth slows down.
Whatever the motivation, it’s worth noting that dividends are an important part of corporate strategies in 2012. That should be a sign that if you haven’t made dividends a big part of your retirement portfolio yet, now is a great time to start.
Read my recent column, “5 Ways Dividend Stocks Will Save Your Portfolio,” for more information.
Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.