In fact, while fixed income may be taken out back to the woodshed, dividend-paying stocks continue offering upside capital appreciation while paying investors to sit and wait.
Not quite sure? Take a look at my last 2012 dividend article "Buy and Forget These 5 Dividend Stocks in 2013." By comparison, the S&P 500 ETF is up about 12% during the same time period. After adjusting for dividends, my list becomes even more impressive.
Corning + 13.35%
Coca-Cola + 9.2%
Wells Fargo + 19.84%
Intel + 17.99%
General Electric + 12.90%
All but one beat the market average, and as a whole I beat the average by several percentage points (plus the difference in dividend payments). It's hard to argue that Coca-Cola is a loser because investors "only" made about 10% since the start of 2013.
More importantly, I have a new list to present for your review. I've remained bullish with some names for some time now.
I'm quite excited about the opportunities from the market weakness. Recent declines in share prices have opened the door to take advantage of buying dips.
For long-term investors, it's hard to beat the outperformance of dividend-paying stocks. Historically, if you avoid yield traps and stick with boring, albeit growing, companies that have a history of increasing their dividends, you will beat the market. It's not rocket science, and it doesn't require paying an investment adviser. Buying dividend leaders has worked through bull and bear markets.
Background: General Electric is one of the largest and most diversified industrial corporations in the world. GE is engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity.
Price To Book: 2
Earnings Payout Percentage: 50%
GE makes many of my lists because I think it's a fantastic investment. So many others agree that the only way to gain an advantage is to use overall market weakness as your entry signal. Ideally, you want to buy after three down days.
General Electric pays 76 cents annually in dividend payments. The yield based on a recent price is 3.3%. After a few slices of humble pie in 2009 and early 2010, GE is once again raising the dividend at regular intervals. Unless the landscape for GE changes, there is little reason to think dividends (and the share price along with it) won't continue higher.
Short-sellers are next to impossible to find. Short interest is so low I only include it to demonstrate the smart money is not betting against this company; 0.8% of the float is short based on the last reported numbers.
Background: Wells Fargo is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance services through stores, its Internet site and other distribution channels across North America as well as internationally.
Price To Book: 1.5
Earnings Payout Percentage: 26%
Wells Fargo was one of the few banks that didn't require the government to save it from poor loan decisions. US Bancorp is another large bank for which I have respect and it is on my buy list.
Wells Fargo is also the second stock to make both lists again. GE was the first and Wells Fargo is a strong second. The dividend payout percentage is uncommonly attractive, and if any stock is going to continue raising the dividend amount, you can bet this bank is in the running. The board of directors recently raised the amount and paid 30 cents. That's almost back to the start of 2009 amount of 34 cents.
After cutting the dividend from 34 cents down to 5 cents, Wells Fargo has come a long way. Short-sellers are not interested in betting against this one. Short interest is a non-factor at a rate of 0.9% of the float.
Keep the powder dry and look for a retracement near $39 as a lower-risk entry level.
E. I. du Pont de Nemours
Background: DuPont is involved in science and technology in a range of disciplines including high-performance materials, specialty chemicals, pharmaceuticals and biotechnology.
Price To Book: 4.1
Earnings Payout Percentage: 35%
Over the last couple of months, DuPont had a brilliant run. Shares moved from under $50 to over $57. The stock has moved lower since, setting up a marvelous support level that can be bought.
Investors are receiving $1.80 in dividends for a yield of 3.4%. Unlike GE and Wells Fargo, DuPont didn't lower the dividend amount in 2009, although the rate remained the same from 2007 until 2012. It didn't take long before the rate was increased again, in May 2013 the payout rose to 45 cents a share.
Short interest is near the higher end of my comfort level for a dividend-paying stock. At 2.8% of the float, investors should keep a close eye on the short interest level. If it moves much beyond 4%, the market may be signaling it's time to exit or hedge your position with long dated options.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.