Newspaper article THE JOURNAL RECORD

Slow Growth in Dividends a Surprise

Newspaper article THE JOURNAL RECORD

Slow Growth in Dividends a Surprise

Article excerpt

It doesn't take a big number these days for a stock to qualify as "high-yielding."

In a period marked by the lowest interest rates in a generation, and some of the skimpiest stock yields in modern memory, a dividend payout of just 4 percent or 5 percent can be enough for a stock to earn consideration by yieldconscious investors.

A typical stock, as represented by Standard Poor's Corp.'s 500-stock composite index, now yields about 2.75 percent.

Ralph Acampora, an analyst at Prudential Securities, says only about one in eight stocks, or 12.5 percent of the total, now yields 5 percent or more _ down from 22 percent just two years ago.

"The stock market, on balance, has been very kind to all of us over the past couple of years," Acampora observed. "But as day follows night, lower yields follow rising stock prices."

What's more, the level of absolute dividend payments isn't rising very fast as the economy recovers erratically from its slump of the early 1990s.

"Dividends are growing more slowly than we had expected," reported Standard Poor's Corp. in its advisory publication The Outlook. "The current annualized rate of payments on the S P 500 index is only 1.6 percent above the level a year earlier.

"While a surge is possible later this year, we have lowered our estimate of dividend growth for 1993 to 4 percent to 5 percent, from 6 percent previously."

As a result of all this, "investors depending on financial investments for yield are encountering a hostile environment" when they shop for places to put new money, said Norman Weinger and Robert Metz, analysts at Oppenheimer Co.

The picture isn't all bleak. A prime presumption behind today's high prices and low yields for financial investments is that inflation has been subdued, relieving a major threat to the purchasing power of invested capital.

In the early '80s, when dividend yields were double or triple what they are today, inflation reached a two-digit pace that effectively wiped out most or all of the purchasing power of what investors received, even before taxes were taken into account. …

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