The latest example of the power of dividends and dividend growth came on June 16 when U.S. Bank Wells Fargo (WFC) announced a 10% dividend increase. The stock market promptly celebrated big time. Normally dividend increases are hardly reported as news let alone get front page headlines. What made this raise by Wells Fargo so powerful was that it came after revelations about one of the largest, most widespread banking crisis's in history. Billions in mortgage related write downs and deteriorating credit quality brought financial stocks down hard in 2008. The XLF Financial Sector ETF was down over 40% since 2008 began.
Wells' announcement went completely contrary to all of the built up pessimism for the future of financial stocks. Dividends and dividend raises tend to do this. If Wells Fargo is able to pay shareholders 10% more now than they did last year, they must have some type of confidence in their future earnings power despite the sector crumbling around them. This is just a small piece of the puzzle as to why dividend growing stocks and dividends in general are my holy grail as an investor. Yes, in the word's of Wyclef Jean 'Where my money at?'
This article was written by the moneygardener. You may email questions or comments to me at [themoneygardener(at)gmail.com].
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