Beware the “Stairmaster”
Companies must decide for themselves whether dividends are the best method to return value to shareholders. Although it’s never inherently a bad idea to boost dividends, investors should beware the “Stairmaster.” A dividend stock that flexes its financial muscles quarter after quarter may not be using its resources intelligently. Step after step, The Southern Company (NYSE:SO) and Xcel Energy Inc (NYSE:XEL) have pushed their dividends higher through the worst of the Great Recession.
Atlantic, why can’t you be more like Exelon Corporation (NYSE:EXC)?
Atlantic wasn’t the only utility to dice up its dividend this past quarter. Exelon Corporation (NYSE:EXC) announced on Feb. 7 that it would slash its dividend by a whopping 40%. But unlike Atlantic, Exelon’s stock has risen 12% since its earnings report. That’s 4.5 percentage points above the Dow Jones U.S. Utilities Price Index and more than nine percentage points better than the S&P 500‘s return.
Which dividends deliver?
Regardless of all the number crunching and examples, company fundamentals are irrevocably the means to your dividend end. Some haircuts look good, some look bad, some are necessary, and some aren’t. Pick your investments wisely and you’ll end up with some handsome profits.
The article Can Dead Dividends Deliver Growth? originally appeared on Fool.com.
Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter @TMFJLo and on Motley Fool CAPS @TMFJLo.The Motley Fool recommends Exelon and Southern Company.
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