Pop Songs Come And Go, But Dividends Live Forever

In 1988, as my college adventure was winding down, I stood in a noisy bar, straining to hear what was coming out of the stereo.

My girlfriend (now wife) commented that it sounded like a regional band that we followed. “Nah..” I said. “Sounds like one of the Finn brothers from Split Enz.”

Not to brag, but I was spot on. It was Crowded House, and offshoot by Split Enz guitarist/songwriter Neil Finn.

Split Enz where the seemingly one and a half hit wonders from New Zealand who gave us the New Wave pop gems “I Got You” and the lesser known but equally great “Six Months In A Leaky Boat” both penned by Neil and brother Tim.

While Crowded House went on to sell a bazillion records thanks to a nice handful of hits (“Something So Strong” and “Don’t Dream It’s Over”…etc.) Split Enz has been relegated to flash in the pan, VH-1 Hasbeen Countdown status. Sad, but incorrect.

Before they broke Stateside and in Britain, Spilt Enz had enjoyed more than modest success in Australia and New Zealand since the early 1970’s.Global commercial recognition didn’t happen till the early 80’s. As far as Their home base was concerned, they were always the toppermost of the poppermost.

Luckily for the Finn Brothers and other 80’s hit makers, the music of the “Gimme Decade” has returned. But eventually, everything does. 2010 was the year skinny ties and dividends came back in vogue and as public chatter gained momentum, many high quality, dividend paying equities enjoyed a nice run.

Verizon (VZ) picked up around 16% for the year to compliment its 5%+ yield. Utility stalwart Southern Company (SO) turned in over 14% plus yield not included. Even outliers like Cream of Wheat maker B&G Foods (BGS) climbed nearly 50%. Throw in the yield and you’re better than 57%. Numbers like that, naturally, generate talk of whether the whole dividend investing idea is done at least for the near term. Don’t count on it.

Two years ago when nervous Nellies were paying the government for the privilege of owning treasuries, investors who could make a fist started sniffing around under loved dividend stocks. The 10 year was paying a beggarly 2.1%. However, Orville Redenbacher’s dad, Con Agra (CAG) was yielding around 6%. While owning CAG shares carries more risk than the treasury, 6% does a better job of paying the bills than 2.1%. Right?

A broader question may be do dividends really ever go out of style? No. General Electric (GE) and Proctor and Gamble (PG) have paid them since the 1890’s. Back then, spats were all the rage in men’s accessories. And Bank of New York Mellon has shown the love since 1785. The Constitution was still a rough draft. In fact, stock dividends trace their roots back to 17th century Holland. With that kind of mileage, the dividend is hardly a fad. Spats? Not so much. God, I hope they don’t come back.

If you look around, you probably haven’t missed the run. AT&T (T) is still trading with a single digit trailing P/E and paying about 6%. Drug giants Lilly (LLY) and Bristol Myers (BMY) pay better than 5% and have very modest P/E’s. There’s still time to own good dividend payers. Talk may cool down. Fine. Some of the names you may want may come back as the fad chasing money goes elsewhere. Let ’em chase something else. Like the song says, “You know they won’t win.”

Disclosure: Long T, VZ, SO, CAG, LLY, PG, and BMY in client accounts.

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