Thanks to this year's booming market for initial public offerings (IPOs), there are a handful of new dividend stocks for yield-starved investors.
In the first quarter of 2013, 45% of all new offerings paid a dividend. That compares to just 16% in Q1 of 2012, according to data from Renaissance Capital.
This is the most dividend stocks to debut in a quarter since Q2 of 2008, when 69% of IPOs paid a dividend.
The trend is in direct response to investors' hunt for yield, and comes at a time when dividend stocks should be part of everyone's portfolio.
As Money Morning Global Investing Strategist Martin Hutchinson has explained, "The truly rich don't spend their days watching the financial news and trading stocks. They're too smart for that. They know that investing in steady income-producing dividend stocks is just as rewarding over the long haul."
Why Dividend Stocks Matter to Your Portfolio
Thanks to the near-zero interest rate environment that has been around for nearly five years and isn't going anywhere - compliments of the U.S. Federal Reserve - yield-starved investors have had limited options.
Investors clamoring for yield used to flock to bonds and CDs. But with the best bond yields currently coming from high-risk junk bonds, and CD rates puny at best, dividend stocks have become a favored sector.
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.
Those returns get even better when payout ratios increase over time. Over the last 25 years, dividends shelled out by S&P 500 companies have increased at a compounded rate of 3.2%, according to data from Kiplinger.
Another bonus of dividend stocks: They tend to perform better than non-dividend payers.
Investment firm BlackRock notes that over a 75-year period ending 12/31/11, the S&P 500 averaged 10.01% per year. Dividend stocks in the S&P 500 returned 12.28% while non-dividend payers returned 8.96%.
Regular cash distributions send a clear message about a company's prospects, performance and fundamentals. They're a sign that management cares about valuing the shareholder, instead of using excess cash for executive compensation.
Furthermore, dividends tend to be more predictable than stock prices. As a rule, dividend stocks are less volatile than non-payers.
The Best New Dividend Stocks of 2013
A Standout Among MLPs: Among the 14 dividend paying IPOs of Q1 2013, 10 were master limited partnerships (MLPs) and real estate investment trust (REITs). Both are a special class of equities coveted for their handsome payouts and yield.
A standout in the MLP initial public offering category is CVR Refining LLP (NYSE: CVRR), up 40% since its Jan. 16 entrance at $25. Renowned activist investor Carl Icahn owns 71.2 million shares of its parent firm CVR Energy Inc. (CVI) which still maintains an 80% plus stake in CVRR. CVI is the second-largest position in Icahn's portfolio.
Sugar Land, TX-based CVRR, a petroleum refiner, is attractive based on its flush cash flow, robust earnings and distribution guidance. It trades at five-times earnings and operating cash flow has grown 500% over the last two fiscal years. Shares have a forward yield upwards of 20%.
The Rewarding REIT: To date, real estate and property offering are up almost 40% from last year to nearly $14 billion. Healthcare offerings have jumped to nearly $10 billion from less than $7 billion in 2012.
In this combined category is Aviv REIT Inc. (NYSE: AVIV). Shares hit the Big Board March 20 at $20 a share. The stock popped 14% on its first day of trading and is up 20% in just a few weeks.
Aviv REIT owns post-acute, long-term care skilled nursing facilities and other healthcare properties. The company owns 258 properties that are leased to 38 operators in 29 states.
Aviv's payout rate is among the highest in the sector at 7.6%
Nothing Like a Classic: Pinnacle Foods Inc. (NYSE: PF) is the company behind the classic Vlasic pickles, Swanson Pot Pies and Mrs. Butterworth's pancakes. PF went public March 27 at $20 a share. Shares have since climbed more than 17%.
Pinnacle boasts a hearty 3.8% annual yield (based on its target quarterly dividend of 18 cents). That handout is well above the average 2.2% dividend yield of stocks in Standard & Poor's 500 Index.
CEO Bob Gamgort told CNBC, "Our dividend payment is reflective of the incredible free cash flow we have. We can pay a 3.8% dividend yield and yet have a tremendous amount of cash flow to invest in the company, to pay down debt, and to pursue M&A."
These three companies could be on their way to joining a list of established dividend stocks that have decades of steady payouts. Here's a list of those top dividend stocks.
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