Dividends for investment consideration
Dividend-paying stocks are often attractive to investors looking to generate a stream of additional income from their investments. These investors might consider investing in a dividend-paying stock with the expectation of realizing gains from periodic dividend payments as well as from stock appreciation. Let’s look at that in more detail.
Total returns help determine the total return on investments from dividends, share repurchases, and price appreciation of a stock. In the above chart, we see that the blue region shows the recent one-year gain or loss in the value of the investment (in percentage) as a result of a change in the stock price for eight stocks. Usually, this includes appreciation from a share repurchase program. Consequently, the yellow region shows the gain in investments from dividends over the same period.
Total returns by company
Among the companies that operate within the agriculture sector, FMC (FMC) has outperformed its peers with a total one-year return of 53.2% as of December 11, 2017. That includes a 52.4% return from a stock price appreciation and 74 basis points in dividend yield.
CF Industries (CF) was next with a total one-year return of 30.4% as of December 11, which consisted of a 27.3% return from stock appreciation and 3.1% in dividend yield. Monsanto (MON) followed with a total return of 14.4%, which included 12.6% returns from stock appreciation and 1.8% returns from dividends. Agrium (AGU) delivered a total return of 11.6% with 3.1% from dividend yield.
As for the remaining stocks, all experienced a price decline for the same one-year period as of December 11, but dividends helped to somewhat soften the impact of negative returns.
Based on these figures, we can already see that dividends may play a critical role in investment decisions for investors. While there are several companies in various sectors that distribute dividends, in this series, we’ll pick our top four dividend stocks (SDIV) within the above group of stocks.