Market volatility and concerns about rising interest rates are bringing dividend stocks back in vogue. Investors looking for more stability during volatile times are pouring into dividend-paying companies.
The iShares DJ Select Dividend Index (DVY) is up over 2.5% in 2011 -- a strong start for what some analysts believe could be the year of the dividend. Matt McCormick, portfolio manager from Bahl & Gaynor Investment Counsel, which specializes in dividend investments, came by "Breakout" to talk dividends with Macke and Nesto.
"When you have a company that has a strong dividend policy, it's inherently a high-quality company," he says. "A lot of people can manipulate revenues and earnings, but you cannot fake a dividend payment."
And there's no shortage of companies making announcements initiating or increasing dividends this year.
A Tale of Two Dividends
Cisco (CSCO) and Oracle (ORCL) are among the latest to step up to deliver some dividend news to investors. Cisco announced a long-awaited plan to pay a 6-cent per share quarterly dividend in a bid to boost investor confidence. The networking-equipment maker is the worst performer in the Dow year-to-date. On the flip side, Oracle is driving the broader market higher after beating Wall Street's estimates, reporting a 78% rise in fiscal Q3 profit and lifting its quarterly dividend by 20%.
How to Spot the Winners
McCormick's top pick is Procter & Gamble (PG), based on a 3.1% yield and the recently announced deal with Teva Pharmaceuticals (TEVA) to expand the reach of global over-the-counter drug brands. He calls this the "quintessential blue-chip consumer staple stock." For more detail on his other top picks, click on the video above.
McCormick's Dividend Plays:
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Disclosures: McCormick's firm owns PG, MCD, QCOM and BNS. McCormick has no personal positions in stocks mentioned.