Dividends, regarded as a key indicator of a companyâ€™s financial health and contributing significantly to a stock investorâ€™s long-term wealth, can be a crucial factor in evaluating a company for long-term investment. In todayâ€™s market, itâ€™s even more critical to build a portfolio of quality companies with the financial strength necessary to issue dividends.
A recent research study found that, in the year after large-cap companies raised their dividends, they outperformed their peers (based on total return) by an average of 1.8 percentage points. Those that began paying dividends for the first time, or reinstated them after a lapse, outperformed their peers by 2.7 percentage points. Small-cap and Micro-cap companies have also issued various types of dividends to reward existing investors as well as attract new investors.
Although the dividend payable dates for these companies have passed, some of the recently announced micro-cap dividends include EvergreenBancorp, Inc.â€™s (OTCBB: EVGG) 5% stock dividend and cash dividend of $0.035; Colorado Goldfields Inc.’s (OTCBB: CGFI) 30% stock dividend; and American Green Group, Inc.â€™s (PINKSHEETS: AMNE) preferred stock dividend. Companies that have upcoming dividend payable dates include United Community Banks, Inc.â€™s (NASDAQ: UCBI) quarterly dividend that will be paid in common stock on April 1, 2009; Syndication Inc.â€™s (PINKSHEETS: SYNJ) upcoming 5% stock dividend to be paid on April 29, 2009; and TIB Financial Corp.â€™s (NASDAQ: TIBB) stock dividend that is payable on April 10, 2009.
Kraig Biocraft Laboratories, Inc. (OTCBB: KBLB), a development-stage biotechnology company focused on developing high performance polymers and technical fibers, is a company weâ€™re closely watching that recently approved a stock dividend. Shareholders of record, as of the close of business on the record date, will be issued nine additional shares for each share of Common Stock held. The company has made significant progress in their labs over the past few months and is closer than ever to finding a solution for producing commercial quantities of spider silk, a super-strength fiber that has an unparalleled capacity to absorb energy and dissipate it in a very controlled manner.
From January 1926 through December 2004, the annualized total return for the S&P 500 was 10.46% per year. Surprisingly, the dividend component consisted of 41.28% of that return. With dividends making such a profound impact on investorsâ€™ long-term returns, it is crucial that investors take dividends into consideration when making investments.
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