David Sterman

Let's get the bad news out of the way. Dividend-paying stocks have risen just 2.3% in value on average since 2001, according to Wells Fargo. But if you add in the value of the dividend payments, then you're looking at a healthier 26% return. That's about 6% higher than the broader S&P 500 during that period.

Perhaps even more impressive is the fact that dividend-paying stocks are a lot less volatile. The S&P 500 fell by almost 6% in 2011, but dividend payers as a group rose 0.6% and delivered a heftier 3% return when accounting for dividend payments. Even when you consider the stunning snapback in stocks that occurred beginning in March 2009, the divided payers still generated a total return that was 6.4% higher than the broader market. These are truly rain or shine stocks.

In fact, everyone at StreetAuthority knows that our readers are big fans of dividends. They are among our most popular stories and our most popular newsletters. (If you haven't checked out Carla Pasternak's High-Yield Investing, for example, I highly recommend it.)

Funny thing is, companies aren't catching the trend, as the amount of money they set aside from their earnings for dividends (known as payout ratios) remains quite low. As Wells Fargo noted in a recent report, "companies may only just be beginning to catch on to the fact that investors are keenly interested in dividend paying stocks."

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com

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