Coca-Cola Co./AP/File
This video still, provided by the Coca-Cola Co. and Wieden + Kennedy, shows the polar bears advertisement the "Catch," that aired during last month's Super Bowl. Coco-Cola is a favorite dividend-paying stock among investors looking for a higher yield on their savings.

Dividend-paying stocks: more gains ahead

Dividend-paying stocks have room to grow, says BlackRock's CIO. One reason: Investors dissatisfied with low returns on their savings will be lured by the higher payouts of dividend-paying stocks.

Dividend investing has momentum and room to grow — possibly even faster than earnings this year — despite low payout ratios as companies hoard cash, Chris Leavy, BlackRock CIO, told CNBC Thursday.

 Leavy, who advises on BlackRock’s $275 billion in actively managed equities, attributes his optimism to three things: inflows of only $22 billion last year, compared with more than $100 billion for the past three years for bonds; companies making 12 to 14 times earnings and paying out reasonable dividends; and the growing number of investors dissatisfied with the low interest rate on their savings.

Leavy said a reasonable dividend means you don’t necessarily have to reach for the highest yields possible. “You want an above-average dividend yield, but you really want to focus on dividend growth,” Leavy said. “Most people are going to have a very long retirement. [With] a fixed coupon … that purchasing power isn’t going to grow.”

 He also advises investors to avoid companies with over-leveraged balance sheets. Leavy’s top picks include global consumer companies like Coca-Cola. Investors “can ride the growth of the middle class in some of the emerging economies,” he said.

And despite recent cuts, the firm believes dividend payout ratios in the financial sector will go on the rise, as is the case with JPMorgan Chase.

“The best protection against dividend cutters is to really focus on the long-term growth of the dividends,” Leavy said. “That way you have some margin of safety.”

He noted that the ideal portfolio would include a combination of high-yield, lower-quality bonds and high-quality stocks, whose long-term growth rates are still “compelling.”

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to

QR Code to Dividend-paying stocks: more gains ahead
Read this article in
QR Code to Subscription page
Start your subscription today