Equity mutual funds that pay dividends are making a comeback among investors who were burned by technology companies and other types of fast-growing stocks that focused mainly on generating profits, the Associated Press reports.
A number of mutual fund giants, including T. Rowe Price, The Vanguard Group and American Funds, are capitalizing on the trend by promoting investments that mainly invest in dividend-paying stocks. These types of funds are especially appealing to conservative investors because many dividend-paying stocks tend to come from high-quality growth companies.
The return of dividend-paying stocks is a sign that more companies are increasingly focusing on corporate governance and steady growth, according to Morningstar analyst Paul Herbert. Last year, the number of companies in the Standard & Poor's 500 that paid dividends rose to 376 from 350 in 2002. Still, the number dividend-paying companies still lags the figure of 469 from 1980. The average dividend income of 26% after 2001 significantly lags average historic dividend income figures of roughly 46%.
Tax law changes enacted last year helped fuel the resurgence in dividends by reducing the tax liability on dividends to 15% from previous rules that taxed dividends as ordinary income.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.