Many people invest in dividend-paying stocks as a source of income and for the opportunity to reinvest the dividends to purchase additional shares of stock. Generally speaking, dividend-paying companies are seen as being more financially stable and mature. In turn, the stock prices of these companies may steadily increase over time while shareholders enjoy periodic dividend payments.
To find out exactly what investors do with the dividend income they receive, we posed the following question to our readers last week:
What do you do with dividend payments you receive from companies?
Here are the results:
Out of the 2,650 votes we received through 6 a.m. (Central) on Sunday, 79% reinvest their dividends to purchase additional shares of stock. From those that do some type of dividend investment, just over 54% automatically reinvest in additional shares of the company paying the dividend and nearly 27% selectively invest their dividend income.
Of the remaining respondents, 10% put their dividend income into a savings or money market account and 9% use their dividend income to cover expenses.
Weekly Special Question
To find out the favorite dividend-paying stocks among our readers, last week’s special question asked:
What do you consider to be the TOP THREE dividend-paying stocks right now and why?
In all, 143 readers answered the question and submitted 360 ticker symbols. By an overwhelming margin, AT&T (T) was the top dividend-paying stock, garnering 15% of the votes. The top reason cited for AT&T’s popularity is its history of dividend payments. Many respondents also cited AT&T’s history of raising dividends, although for the last seven years the dividend increase has been less than 2.5% annually. Respondents also like T’s high relative yield, which is currently 4.4%.
Rounding out the other top vote getters are:
- Exxon Mobil (XOM): 4.7%
- Johnson & Johnson (JNJ): 4.2%
- Altria Group (MO): 4.2%
- Verizon Communications (VZ): 4.2%
The common themes that ran through all of these selections were a long history of dividend payments; high relative dividend yield; and a history of dividend increases.
Want to weigh in? Participate in our weekly member poll, updated every Tuesday, and see the results online at http://www.aaii.com/memberquestion.
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