Things are really changing in the Stock Market and I think it is for the better, Stock holders really need to have access to cold cash for their investment in any cash rich company and right now the stock market has gone through the roof so there is plenty of cash to share. I wrote a month ago about Apple for the first time in my Blog here from May 7, 2013 yes Apple who for the first time is giving their stock holders a dividend each year. Yes, cash for just owning the stock.

 

The practice of corporations buying back stocks when they are cash rich is fading. Traditionally companies try to appease investors by bying their own stock if corporate earnings are soaring, as they are now. While companies are increasing buybacks in the profit and market rally, they’re giving more importance to dividends.

Buybacks remain the largest way companies return cash to shareholders. Big deal. So I make a profit on the investment of spending my money on a stock. Now I don’t own any shares anymore in that company and it is still a good company. People that make the most money in the stock market are those that never sell. Some stocks are held by people for thirty years and those people become millionaires. It would be nice to make an income in the form of a dividend each year from a stock purchase.

In the first quarter, companies spent $100 billion dollars buying back stock, that is more than the $70 billion dollars spent on giving cash dividends to share holders, says S & P Dow Jones Indices. But, the important distinction is that this time a significant portion of the cash being returned to the investors, 40% per cent is coming in dividends.

Dividends now are a bigger portion of the total payout than in other market rallies. Companies rationally have loaded up on their stock when it’s peaking at the expense of dividends. Dividends were 33% per cent of the total payout to investors in the third quarter of 2011. As the market was soaring in the third quarter of 2007, dividends were 26% per cent of the payout. So, now more cash right in your pocket now.

There are other signs of the rising importents of dividends now. The current 2% per cent dividend yield on the S & P 500 is well above the 1% per cent yield when stocks were peaking in 2000. There is a rising shift towards dividends as it represents a change in desires of investors. Some people will only buy a stock in a company if they will pay out a dividend. We want to keep our stock for an investment and we want some rewards now.

For some companies buying back it’s shares was a disaster. Look at Dell. The company bought back shares at $27.79 a share. The stock dropped down to its current price of $13.42 If Dell didn’t buy back any shares it’s value would have been 46% per cent higher now. See, even the big corporate giants make mistakes too sometimes.