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Fund Spy

Is It Too Late to Jump on the Dividend Bandwagon?

Fund managers say dividend-paying stocks became a "crowded trade" in 2011, but they still have long-term appeal.

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By the end of the 1990s, dividends were passe. But after the turbulence of the 2008 financial crisis and its still-unfolding aftermath, dividend-paying stocks reappeared on investors' radar screens. Also, rock-bottom bond yields have pushed many income-oriented investors into stocks.

In aggregate, equity funds suffered net redemptions in 2011, but investors didn't shun those focused on dividends, which enjoyed roughly $3 billion in inflows. Dividend-oriented exchange-traded funds took in a much bigger $14.3 billion haul. Predictably, fund firms launched new offerings to take advantage of the trend, and some already-existing funds became more income-oriented.

Christopher Davis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.