Geraldine Weiss is in the spotlight for her dividend-yielding stock picks.
As growth stocks flourished during the 1990s, many investors dismissed dividend-paying stocks as dinosaurs.
Not anymore. With the bear market trying to end its near-record losing streak at three years, investors have become reacquainted with the key role dividends can play in enhancing long-term total return. Since 1925, about 44% of the Standard & Poor's 500 Stock Index's average annual total return of 10% has come from dividends. Even during the 1990s, dividends accounted for one-fifth of the index's total return.
They also provide a good cushion for defensive investors in a down market. During the first three quarters of 2002, stocks in the S&P 500 that paid dividends were down 17% during the first three quarters of 2002-a formidable drop, but certainly better than the 39% plunge in value for no-yield stocks in the index.
Proposals gaining support in Congress to reduce or eliminate the tax individuals pay on corporate dividends, currently as high as 38.6%, further enhance the outlook for dividend-paying stocks. With more favorable tax treatment, companies might use their excess cash to boost dividends and attract investors rather than buy back their stock or make ill-fated acquisitions.
The new spotlight on an old investment standby comes as no surprise to Geraldine Weiss, editor of the La Jolla, Calif.-based newsletter Investment Quality Trends. Since 1966, when the woman who one publication dubbed "the Grande Dame of Dividends" sent out her first issue, she has promoted the message that while companies can massage their earnings, dividends don't lie. They are, she believes, the best barometer of a company's overall health, its dedication to sharing profits with shareholders and its stock's valuation level.
She shares that philosophy twice a month with her newsletter's subscribers. Since 1986, reports The Hulbert Financial Digest of Annandale, Va., her recommended stocks gained 12.2% annualized through October 31, 2002, beating the 10.9% annualized gain of the Wilshire 5000 Index over the same period. Her picks were 27% less volatile than the index, and her newsletter performed better than each of the 42 others tracked by Hulbert over the period on a risk-adjusted basis. Over the last year, her recommended portfolio has risen 6.5%, compared with a drop of 13.4% for the Wilshire 5000.
Weiss' career as a dividend diva began as a child. "My father told me that he would never buy a stock unless it paid a dividend," she says. "He believed that companies that did not share profits with stockholders in that way were not worth investing in."
When she began looking for a job in the securities industry in 1965, she found that potential employers inevitably ushered her to the secretarial pool. To get in through the back door, she started a newsletter in 1966 with a male partner. While the two sent out identical promotional letters under their respective names, his inevitably received responses while hers were almost always ignored.
After buying out her partner in the late 1960s, she continued sending out the newsletter under the name "G. Weiss." Eventually, Weiss came out of the gender closet when she appeared on Louis Rukeyser's Wall Street Week in the early 1970s. "By that time, my subscribers were making so much money that they really didn't care," she exults.
A Measure Of Value