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Private Briefingwith WILLIAM PATALON III, Executive Editor
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Near-zero interest rates have lots of savers clamoring for yield and plunging into dividend stocks.
Compared with paltry yields on a bevy of bonds, dividend stocks - especially those with the potential of capital appreciation - have become progressively more attractive to income-seeking investors.
Now's a good time to hunt for dividend stocks, as more companies increase payouts. Dividend payments grew sharply in Q4 2012, with 1,262 dividend increases reported, a 94.5% gain over the 649 increases in Q4 2011, according to S&P Dow Jones Indices.
And rich dividend payments are expected to continue among companies flush with cash since
they have curtailed expansion and investment amid growing global uncertainty.
In fact, more than 5,000 analyst estimates compiled by Bloomberg News forecast that companies in the MSCI World Index will boost payments by 3.8% to a combined $39.43 a share this year, up from a low of $29.58 in 2009.
Historically, dividends have represented a significant percentage of total investment returns. Since 1930, dividends have accounted for more than 40% of total stock market returns.
And dividends can grow. Over the past 25 years, dividends paid out by S&P 500 companies have grown at a compounded rate of 3.2%.
"If you buy some quality equity, you can buy the dividend and get some dividend growth with it," Jacob de Tusch-Lec, who helps oversee $19 billion at Artemis Investment Management LLP, told Bloomberg. "With bonds, you are not protected against inflation, you are selling any upside and you are not getting any income growth. Investors have been going lower and lower down the risk curve to get yield, but at one point, some of those credit assets are no longer much safer than equities."
Dividend stocks also tend to hold up better in rocky markets. In the calamitous year of 2008, equities that paid dividends on average shed 39% on a total-return basis. Non-dividend-paying stocks lost 45.4%.
But buying dividend stocks simply based on hefty dividend yield is never prudent. That's why we put together the following 10 dividend stocks to buy now.
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