Newspaper article THE JOURNAL RECORD

Cooling at Wall Street Puts Emphasis on Dividends

Newspaper article THE JOURNAL RECORD

Cooling at Wall Street Puts Emphasis on Dividends

Article excerpt

NEW YORK -- After two straight years when capital gains told most of the story on Wall Street, some analysts think stock market investors will pay greater attention to dividends in 1997.

Stock prices climbed more than 60 percent in the bull market surge of 1995 and 1996, as measured by Standard & Poor's 500-stock composite index.

The S&P 500's 1996 gain of slightly more than 20 percent overshadowed an 8 percent increase in the dividends paid by the companies that make up the index. In that sort of atmosphere, it was easy to understand why most investors concentrated on searching out and celebrating capital gains possibilities, rather than buying stocks for such mundane reasons as gradual growth in dividend payments. "But with the market expected to cool down considerably in 1997, dividends should become a more important part of the investment equation," S&P analysts assert in the firm's weekly publication The Outlook. "In addition to providing a tangible return, stocks that pay regular dividends tend to be far less volatile in an unsettled market than those that don't." Even if mutual fund investors and other buyers keep money flooding into stocks this year, the market will face some anxious questions about dividend prospects. The dividend yield on the S&P 500 has lately been hovering at historic lows of right around 2 percent, providing an oft-cited sign that stocks may be vulnerable to a big setback. On an immediate level, this means that anybody who buys stocks for income must settle right now for a very skimpy return. Over time, furthermore, numerous studies have shown that dividend growth and compounding of reinvested dividends have always been a prime component of the total return investors get from stocks. Not all of the news on dividends lately has been downbeat. The number of companies that increased their dividends in 1996 reached a 16-year high of 2,171, S&P reports. …

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