Over the long run, 40% of stock-market gains come from dividends.
The “easy” gains of the early part of a bull market have been made, and stocks are more likely to move sideways. That means now is a good time to remember a frequently overlooked reality of investing: 40% of gains come from dividends over the long run.
Note that most of these names pay out more yield than certificates of deposit and offer the potential for capital appreciation as well, though there is risk to the downside, too, of course. Buckingham reasons that by now — given the maturity of end-markets — Verizon is similar to a low-growth utility. But it doesn’t trade like one, and it offers a much better yield. While Verizon has a forward p/e of 7.4, the S&P 500 Utilities Index trades for about 18 times forward earnings, and it pays out less than half of Verizon’s yield.
Energy stocks are a strong buy. Even though energy prices are likely to go up from here, the group has performed poorly this year. Insiders love the sector. Given the group’s potential for stock gains, it’s a good place to shop for yield. In June OKE insiders, mostly the CEO, bought $1.8 million worth of stock at prices up to $61 — a bullish signal because of the size.
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