Why Big Dividends Are Bad News

Amid the generally gloomy mood in the financial markets, many dividend investors have never been happier. With many companies boosting their dividend payouts in recent months, shareholders have reason to celebrate. But higher dividend payments could actually be a bad sign for the overall economy. New dividend payers Most investors see dividend stocks as conservative, slow-growth stalwarts, and with good reason. Southern Company (NYSE: SO), for instance, pays investors handsomely, but its future profit potential is largely limited by regulators. Regulation can also cover major capital investments, so utilities don’t necessarily have the freedom to plow profits back into its business, even if they thought doing so would improve profits.... Read more