Yo, I have a guest post here this morning that will freak you out. This is an astounding study done by my man Ryan at DynamicDividend.com. It appears that the announcement of a company’s first dividend can be an amazing entry point for investors. This is very relevant when you consider the likelihood of new dividends being announced by both Apple and Google this year. Enjoy! – JB
***
If the data I’ve collected over the last six months is any indication, a very strong case can be made for the initiation of a dividend as a signal that a stock is about to generate market-beating returns.
Below I’ve put together a comprehensive table of stocks that have announced the initiation of a regular dividend (or distribution, in the case of an MLP) since August 1, 2011. I’ve also included each stock’s performance since the announcement, alongside the S&P 500′s performance (via the SPY) during the same period. The results are pretty staggering.
Of the 36 stocks listed, only three are currently trading lower than their final closing price prior to declaring their first payout, and only seven have been outperformed by the S&P 500 since the same announcement. The average gain by the new dividend stocks (22.75%) is an absurd 15.67% better than the average gain by the S&P 500 (7.09%) during comparable periods.
Some highlights include: SMF Energy gaining 182% (vs. 17% for the S&P 500), Ebix gaining 58% (vs. 12%), Intuit gaining 40% (vs. 14%), Xyratex gaining 68% (vs. 2%), and Emcor Group gaining 53% (vs. 16%). Solutia has popped 77%, thanks in large part to Eastman agreeing to pay a 42% premium for the company last week.
Clearly today’s low interest rate environment has had a major impact on these numbers, as income investors are latching on to anything with yield. But the figures below describe a staggering blowout, nonetheless. Notice the absurd lack of red across the board.
| Company | Initiated* | Performance | S&P 500 | Alpha |
|---|---|---|---|---|
| Inergy Midstream LP (NRGM) | 1/26/2012 | -0.39% | -0.52% | 0.13% |
| Rose Rock Midstream LP (RRMS) | 1/23/2012 | 1.55% | -0.28% | 1.83% |
| Zimmer Holdings, Inc. (ZMH) | 1/18/2012 | 9.36% | 0.31% | 9.05% |
| Agilent Technologies Inc. (A) | 1/17/2012 | 6.20% | 1.47% | 4.73% |
| Electro Scientific Industries, Inc. (ESIO) | 1/12/2012 | -2.69% | 1.31% | -4.00% |
| CSP Inc. (CSPI) | 1/11/2012 | 19.24% | 1.52% | 17.73% |
| Focus Media Holding Limited (ADR) (FMCN) | 1/9/2012 | 6.89% | 2.52% | 4.38% |
| Genie Energy Ltd (GNE) | 1/8/2012 | 24.67% | 2.52% | 22.16% |
| Kensey Nash Corporation (KNSY) | 1/3/2012 | 17.28% | 2.92% | 14.36% |
| Solutia Inc. (SOA) | 12/14/2011 | 84.69% | 7.81% | 76.88% |
| First Connecticut Bancorp Inc (FBNK) | 11/23/2011 | 6.94% | 12.57% | -5.63% |
| Griffon Corporation (GFF) | 11/17/2011 | 17.16% | 7.39% | 9.77% |
| IAC/InterActiveCorp (IACI) | 11/2/2011 | 8.82% | 5.82% | 2.99% |
| Noranda Aluminum Holding Corporation (NOR) | 11/1/2011 | 21.84% | 7.48% | 14.36% |
| Lexmark International Inc (LXK) | 10/27/2011 | 11.04% | 2.97% | 8.07% |
| PCTEL, Inc. (PCTI) | 10/21/2011 | 16.07% | 5.89% | 10.18% |
| Oiltanking Partners LP (OILT) | 10/20/2011 | 14.91% | 7.82% | 7.08% |
| Core-Mark Holding Company, Inc. (CORE) | 10/18/2011 | 21.55% | 7.01% | 14.54% |
| Acorn Energy, Inc. (ACFN) | 10/14/2011 | 20.39% | 7.06% | 13.33% |
| HSN, Inc. (HSNI) | 9/27/2011 | 1.45% | 11.57% | -10.12% |
| Emcor Group Inc (EME) | 9/23/2011 | 53.19% | 15.56% | 37.63% |
| Hecla Mining Company (HL) | 9/19/2011 | -25.07% | 9.06% | -34.13% |
| ProAssurance Corporation (PRA) | 9/7/2011 | 13.15% | 9.10% | 4.06% |
| Ebix, Inc. (EBIX) | 9/6/2011 | 57.83% | 12.15% | 45.68% |
| Westway Group, Inc. (WWAY) | 8/30/2011 | 26.70% | 7.89% | 18.81% |
| Nicholas Financial, Inc. (NICK) | 8/29/2011 | 11.76% | 8.10% | 3.67% |
| CECO Environmental Corp. (CECE) | 8/24/2011 | 12.04% | 11.07% | 0.97% |
| Intuit Inc. (INTU) | 8/18/2011 | 40.05% | 14.48% | 25.57% |
| Celadon Group, Inc. (CGI) | 8/16/2011 | 32.54% | 9.74% | 22.79% |
| New Mountain Finance Corp. (NMFC) | 8/11/2011 | 11.93% | 11.88% | 0.05% |
| Kingstone Companies, Inc. (KINS) | 8/11/2011 | 6.26% | 11.88% | -5.61% |
| DSW Inc. (DSW) | 8/9/2011 | 5.16% | 11.79% | -6.64% |
| SMF Energy Corporations (FUEL) | 8/8/2011 | 182.22% | 16.88% | 165.34% |
| Allied Motion Technologies, Inc. (AMOT) | 8/3/2011 | 12.45% | 3.96% | 8.49% |
| J2 Global Inc (JCOM) | 8/2/2011 | 3.77% | 4.56% | -0.79% |
| Xyratex Ltd. (XRTX) | 8/1/2011 | 68.22% | 1.94% | 66.28% |
| Averages | 22.75% | 7.09% | 15.67% |
*Last full market day before dividend announcement. Performance is based on this day’s closing price.
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