NEW YORK, NY -- (Marketwire) -- 05/30/12 -- After lagging the market in the early stages of 2012, dividend paying stocks are beginning to gain momentum. The S&P 500 Dividend Aristocrats Index, comprised of companies that have raised dividends over the past 25 years or more, is up roughly four and a half percent year-to-date. Five Star Equities examines the outlook for dividend paying stocks and provides equity research on McDonald's Corporation (NYSE: MCD) and Prospect Capital Corporation (NASDAQ: PSEC).
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With interest rates as low as they are, long term investors have been looking to high yielding dividend stocks for investment income, where returns currently far exceed those of bonds. "Companies may be only just beginning to catch on to the fact that investors are keenly interested in dividend-paying stocks," Gina Martin Adams, strategist at Wells Fargo Securities said in a report.
The current S&P 500 dividend yield of 2.2 percent, on a year-ahead basis, outperforms the 1.88 percent yield on a 10-year Treasury note. Over 10 years a 2.2 percent yield compounds to 24.3 percent return whereas a 1.88 percent yield brings a 20.5 percent return. One of the major advantages of dividend-paying stocks is that dividends can increase over time. So far in 2012 152 of the S&P 500 companies have raised their dividends in 2012. In the same quarter last year 137 companies raised their dividends, 2010 saw 95 increases and just 68 over the same period in 2009.
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McDonald's currently offers investors an annual dividend of $2.80 per share for a yield of 3.08 percent. The company recently issued $900 million in debt at a record low coupon to help fund their China expansion. The company plans to increase their presence in China as they trail behind Yum Brands in the number of restaurants in the area.
Prospect Capital Corporation currently offers investors an annual dividend of $1.22 per share for a yield of 11.20 percent. For the three and nine months ended March 31, 2012, the company's net income was $50.2 million and $154.6 million, respectively. For the three and nine months ended March 31, 2011, their net income was $33.8 million and $91.3 million, respectively.
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