When Stocks Declare Their First Dividend – Look Out!

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

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The Dynamic Dividend is dedicated to helping income investors identify quality opportunities through dividend stock news, tools, tips, statistics, and ideas.

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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