The First Cut: Attractively Priced Dividend Growth

The First Cut: Attractively Priced Dividend Growth Splash image

When markets become uncertain, investors rediscover the desirability of stable dividend-paying stocks trading at good values. This interest has been further fueled by the favorable tax treatment of qualified dividend income (15% maximum rate*), as well as the general aging of baby boomers focusing more on steady dividend income rather than capital gains.

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This issue’s First Cut focuses on mid- to large-cap dividend-paying companies with current dividend yields (dividend divided by price) above their seven-year average, which highlights companies that may be undervalued compared to their normal yield. To help make sure dividends are secure, only companies with payout ratios (dividend divided by earnings) below 50% and long-term debt-to-equity ratios below 50% made the First Cut. Only the top 30 stocks with the highest historical dividend growth rates made the First Cut.

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