Investing in Funds: A Quarterly Analysis --- Portfolio Strategy: Stocks with Rising Dividends Are Fewer, but Worth the Hunt
Investors seeking income growth with less risk than that posed by the broad stock market have long bought shares of companies that regularly boost dividends.</br></br>But amid the financial crisis of the past year, the strategy -- and, along with it, dividend-focused mutual funds -- took a big hit as banks and other once-reliable sources of dividends slashed payouts to conserve cash. The shares of these companies also plummeted, making it one of the worst periods in memory for dividend-oriented funds.</br></br>Many such funds posted returns of minus 25% or worse for 2008. Although that wasn't quite as bad as last year's almost 40% drop in the Standard & Poor's 500-stock index, the poor performance of such funds stunned shareholders who thought they had chosen a fairly conservative investment approach.</br></br>Many of those investors are now looking for income and greater principal stability in places such as the bond market, while some advisers are steering clients toward different stock strategies.</br></br>But if you are thinking about throwing in the towel on dividends and dividend-focused funds, there may be reasons to reconsider.