In the hunt for yields, “ Mad Money ” host Jim Cramer points out that not all dividends are created equal.
As an example, he used SuperValu, the giant supermarket chain that had continually reassured investors that it believed in its dividend – and how important they were for shareholders.
But there was a caveat.
(RELATED: Cramer’s 5 Recession-Resistant Stocks )“Remember, when stocks go down, yields become larger as the dividend stays the same size but the divisor—old fashioned arithmetic—becomes smaller. Hence you get a bigger yield from the division,” Cramer said Thursday. “Few stocks in the S&P 500 had a bigger dividend than Supervalu going in to today’s session, not because the dividend was outsized but because the stock had shrunk.”
Experience shows that robust dividends have helped slow the sell-off of sluggish stocks, and reinvestment of dividends can compound gains.
But it’s not always a sure thing.Page 1 of 3 | Next Page