After the massive flow of dividend payments that came at the end of 2012 in reaction to changes in the tax law, the pattern is returning to normal. Life goes on, and most companies declare dividends when they report earnings in January, then "pay" them -- in other words, they go ex-dividend -- in February. So now is the time to crank up your dividend research effort and make hay while the sun shines.
I am enjoying the start-of-year rally as much as you are, but there is one sad consequence: Dividend yields are falling as stock prices rise more quickly than companies can increase their dividends. Just like a falling market can produce accidental high yielders, a strong rally can produce accidental paltry yields.
The table below lists the interesting dividends coming up in the next couple weeks. Many names whose quarterly dividends were always around 1% are suddenly not looking so great. For instance, Exxon Mobil's (XOM) dividend will be only 0.63%, rather than the old 0.8% to 0.9%. Southern Copper (SCCO) will now pay an uninspiring 0.6%.
As a dividend trader, you must simply accept the slightly lower yields and plan on trading a bit more. You do not want to increase your risk profile by playing higher yields. For instance, as you look over the list, you will see a ton of master limited partnerships (MLPs), which are identifiable by the "LP" in the company name. These are not more risky businesses per se -- in fact, many are low risk -- but the security is often riskier, as they trade more efficiently, and it is harder to exit your position. For this reason, and because the tax accounting for LPs adds complications, I tend to avoid LPs.
I highlighted names that I just added to the portfolio: Intel (INTC), New York Community Bancorp (NYCB), Wynn Resorts (WYNN), Eli Lilly (LLY) and DuPont (DD). All have reasonably large dividends and OK fundamentals that are unlikely to surprise negatively in the near term. And they are highly liquid, so they are easy to trade into and out of.