I was concerned a year ago that dividend stocks had become too much in vogue--and historically expensive versus the stock market overall--even though they remained attractive versus bonds. And has usually happens when an asset is relatively expensive, the return on dividend stocks lagged the stock market overall in a strong year for equities.
I think the dividend stocks again are relatively attractive, but on a more selective basis, for income-oriented investors. In Europe, for example, the Euro Stoxx 50 Index is up 33% since mid 2012. Yet, the average dividend yield is 3.5%, while the yield on the 10-year German government bond is only 1.5%. Even compared to corporate bond yields, the average dividend yield is 40% higher than the yield on investment-grade corporate bonds. Both yield spreads are historically high in favor of equities.
So when a stock like Total (TOT) still yields 5.6%, there is value there. GDF Suez (GDFZY) yields nearly 10%, and the stock is down 25% over the past year (and 67% over the past five). I would be comfortable holding both of those stocks. But since I think stock prices overall are likely to decline, I would hedge long positions by going long volatility or purchasing put options on the the major market indexes
S & P 500: 1483