Investors Favor Safe Dividends Over Growth
The broad market had another uneventful day, which is respectable news for investors. In fact, since the despicable month of May and early June, the markets have more or less rallied while doomsday news reports dissipated. So have investors discounted the perilous debt situation in Europe and subsequent economic slowdown? According to the U.S. Treasury yield and the S&P Volatility Index (INDEX: ^VIX) , the answer would be yes. The 10-year yields hit a three-month high as more investors are moving away from the safe haven and purchasing more stocks and corporate debt. Conversely, the VIX dropped 1.48% today, ending well below 15 and signifying that investors are gaining confidence in the stock markets.
The data shows investors are moving away from the safety of Treasuries, but are they truly disregarding the economic uncertainty that's still looming? Unlikely. In the following chart, you can see that the 10 highest dividend payers in the Dow Jones Industrial Average (INDEX: ^DJI) are handily outperforming the overall DJI since mid-June.
Source: S&P Capital IQ.
Source: S&P Capital IQ.
It appears investors are still uncertain about the future, but instead of placing their money in Treasuries and effectively gaining negative returns after inflation, they are purchasing less risky, decently sized dividend payers while they wait for the Federal Reserve's next policy meeting.
So who have been the most rewarding high-dividend-paying companies since mid-June? Merck (NYS: MRK) has led the Dow, returning 14.5% to shareholders while also supplying investors the comfort of a 3.78% dividend yield. JPMorgan Chase (NYS: JPM) was the second highest Dow earner during this time period, distancing itself from fellow Dow competitor Bank of America, while also sporting a 3.23% dividend.
Cisco (NAS: CSCO) , although not yet a Dow dividend leader, decided to jump its quarterly dividend after reporting a 4% increase in revenue and an outstanding 56% rise in net income. The technology bellwether is progressing into a mature and stable dividend-paying company, moving into the realm highly sought after by today's investors.
The Federal Reserve will reconvene at end of August and resume its discourse over monetary policy, likely changing the market's temperament. However, smart investors should stay the course and continue to find healthy blue-chip companies with sizable dividends. The best way to build a sizable portfolio is by keeping a long-term focus, and we can help you with our excellent free report, "3 Dow Stocks Loved by Dividend Investors." This free report will detail some of the Dow's other winners and stocks that can benefit every portfolio.
The article Investors Favor Safe Dividends Over Growth originally appeared on Fool.com.Joel South owns shares of no company listed above. The Motley Fool owns shares of JPMorgan Chase and Cisco Systems.Motley Fool newsletter servicesformerly recommended JPMorgan Chase. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.
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