Last September, Apple (AAPL) shares topped $700 on the heels of a major two-month run.
The new iPhone 5 was part of the excitement surrounding Apple, but that wasn’t released until mid-September. What started the run was the company’s first-ever dividend offering.
After months of shareholder handwringing that it was being too stingy with its massive cash stockpile, Apple finally caved to investor demand and initiated a dividend. The company made the announcement on July 23, 2012. The stock jumped 10% in less than a month
Apple was a high-profile example of the power of dividends. Initiating a dividend added 10% to Apple’s share price in less than a month. Several smaller-profile companies have gotten similar bumps after initiating dividends in recent months.
Here are three recent examples:
The North Carolina-based clothing company announced its first-ever dividend on April 3. Since then, the stock has risen 28%, hitting an all-time high in late July.
Shares of this small-cap computer accessories company had been on a steady decline for two and a half years as demand for personal computers has waned. Entering May, the stock was trading at its lowest level since 2001. On May 22, however, Logitech announced an annual dividend of 84 cents a share, to be paid in the second week of September. Since then the stock has risen 14% at a time when the S&P 500 has been flat.
Alaska Air Group (ALK)
On the heels of a successful stock repurchase program last September, the parent company of Alaska Airlines tried to further boost its share price by initiating a dividend. The quarterly dividend, which pays 20 cents per share, was announced on July 11. Since then, ALK stock has risen 6%.
Three recent dividend initiators, three success stories. Introducing a dividend gave the three stocks an average boost of 16% within a matter of months.
There are fewer and fewer large companies that don’t pay dividends these days. According to research by the investment group BlackRock, 81% of S&P 500 companies now offer a dividend. The blue-chip company that doesn’t offer a dividend is becoming a rare breed.
That means we can expect more dividend stocks to come online in the coming months. It’s impossible to predict what company will be the next to initiate a dividend, but Google (GOOG), eBay (EBAY) and Facebook (FB) are three high-profile stocks that come to mind. Paying a dividend has become the norm for so many companies that it’s now essentially bad publicity not to offer one. Just look at the outrage directed at Apple prior to its dividend initiation.
More importantly, the benefits of offering a dividend are obvious. There’s always been a theory that dividend stocks don’t return as much as non-payers. However, from 1927-2011 dividend stocks returned an annualized average of 11.2%, while non-dividend payers returned only 8.3%.
That’s almost a century’s worth of proof that dividend stocks can also net healthy gains. Now we have a number of recent examples of how initiating a dividend helped boost companies’ share price.
So if you find yourself holding onto a number of stocks that don’t pay a dividend, don’t panic. If you’re patient, odds are they may offer one soon. And that could make for a nice return.
More From Wyatt Investment Research
- I've Answered Your Questions
- Why Tesla Is the No. 1 Performing Stock
- The Blue Chip Dividend Hike Is Coming
- Stocks & Offerings