It’s been a nice few months to be logging into my investment account on an almost daily basis. My portfolio of dividend stocks, despite some weak spots, has performed quite a bit better than the stock market as a whole.

And apparently I’m not the only one. The Wall Street Journal today had a nice story by Dan Weil about why dividend paying stocks are regaining popularity. Obviously, the expectations that the Fed will stop raising interest rates, at least in the near term, is a factor. And the story points out that over the long haul, dividend stocks have generally outperformed the overall market on a total return basis.

Still, Mr. Weil’s sources caution against seeking too high a yield, arguing that dividend payout ratios higher than 6% suggest that the market thinks the payout rate is unsustainable. I tend to agree, though a few stocks in my portfolio that have long paid more than 4% have held up pretty well. Still, I think any payout rate above 4% is indeed probably a sign that investors should do their research before buying shares and presuming that the yield is sustainable going forward.

 

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