Despite the fact that traditional financial theory has long held that dividend policy should be irrelevant to stock returns, one of the biggest trends to occur in recent years has been a rush to invest in dividend-paying stocks. The heightened interest in these assets has been fueled both by media hype and the current regime of interest rates, which are well below historical averages.
The low yields generally available on safe bonds during the past six years have led many once-conservative investors to shift their allocations from safe bonds to much more risky dividend-paying stocks. This has been especially true for those who take an income, or cash flow, approach to investing, as opposed to the total return approach, which I believe is the right one.
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