http://www.valueline.com/dow30/f1899.pdf
http://www.valueline.com/dow30/f2084.pdf
Dividends are not an inhibitor of value by forcing a taxable event. Dividends have historically been the greatest return of the total market return. Investing in companies for their dividends for me is far easier than investing on the basis of their earnings, because it is remarkably easy for companies to manipulate their earnings any way they want. Dividends are real cash and to pay real cash is needed forcing a discipline on corporate executives.
Look at the 2 stocks discussed here. JP Morgan and Coca Cola- the 2 companies cannot be more different as an investment for their dividends. Yet both in 2008 paid $1.52 annually in dividends though a review of the history and prospects of the companies would lead one easily to the correct decision of which company to invest in for the future of dividend income in a retirement.
Coke has always earned it's dividend and is paying out about 40-50 percent to shareholders. There is nothing at present in it's business to show this is in jeopardy. It has the highest financial and safety ratings and their earnings are very predictable. In the late 90's investors went crazy and gave this stock a 50PE and a .6% dividend, not because Coca-Cola had unbelieveable options but because investors outlook was insane. Earnings have grown 6.5% over the last 10 years. Coca Cola has one of premier name brands in the world that cannot be easily duplicated.
JP Morgan on the other hand has had no clear dividend policy, they are relatively low in Financial Strength, they have had 3 years so far this decade where they did not even earn their dividend and were estimated to only earn a trifle more than the dividend this year. Dividend growth had averaged only 1.5 % over the past 5 years and for 6 years in the past decade they did not raise the dividend at all. Earnings are very unpredictable and unreliable and earnings have shown only 2 percent growth in the last decade. The government is deciding how their business should be run and how much they can pay their executives. For that reason they want to get out of TARP as fast as possible.
I view Coke as my partial business, with as with all my dividend stocks I expect a percentage of the earnings as a payout to share in the rewards and growth of the company. This is a Benjamin Graham basic tenet, and as a matter of fact for defensive investors he advises limiting yourself to dividend paying stocks.
There are plenty of stocks that with diligent care can provide for a nice dividend portfolio. The best part about dividends is when all the growth investors decide your dividend company is really a growth company and the stock price soars during good times, you can sell to move to another company that provides greater dividends dollar for dollar while still maintaining higher than inflation dividend growth.
I have never found a time when there are not dividend stocks that meet my criteria and yield at least 2 percent with dividends growing faster than the inflation rate. My short list just from the Dow 30 is JNJ, PG, UTX, MCD, XOM, KO. The other 24 for one reason or another do not make the cut for me. Other good dividend prospective companies I follow include PEP (pepsi), BFB (Brown Forman makers of Jack Daniels), for some smaller companies there is HWKN (Hawkins maker of specialy chemicals), NVO (Novo Nordisk maker of insulin and other diabetes care products that just fell into my dividend range) or perhaps UGI a solid growing utility.
It is best to maintain a list of stocks that meet a dividend criteria, follow the holdings and switch when something occurs in a holding that is not expected. Examples of this include not raising a dividend when expected, dividends as a percentage of earnings is climbing too high, earnings becoming less predictible, reduction in companies financial rating (I use value line as they are far quicker to change than any "official" ratings companies, which get mired in politics with executives).
I don't think dividends will be going away any time soon, but many companies who do not have earnings to support are and will be forced to cut them. The recent stock market decline has brought many of these to values not seen in quite a while for them.
I do want to point out that one of the worst performing "indexes" has been DVY, the "dividend achievers". Far from being a passive index, this is rather a low-expense investing scheme which was a rag-tag collection of the highest paying dividend stocks with investing rules that end in the absurdity of selling after the dividend is cut. Well at that point most of loss in that stock has occurred. JP Morgan, Pfizer, (soon to get GE booted I think),the list goes on and on and was at one point almost 50 percent in the financial sector. By the time this mess is done it will probably own almost no financial stocks. Since it's inception in 2003 it has seen it's price fall by 40 percent.