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| LO Crosses Above 5% Yield TerritoryBy Dividend Channel Staff, Monday, June 6, 4:39 PM ET
In trading on Monday, shares of Lorillard, Inc. (NYSE:LO) were yielding above the 5% mark based on its quarterly dividend (annualized to $5.20), with the stock changing hands as low as $99.60 on the day. Dividends are particularly important for investors to consider, because historically speaking dividends have provided a considerable share of the stock market's total return. To illustrate, suppose for example you purchased shares of the S&P 500 ETF (SPY) back on 12/31/1998 — you would have paid $123.31 per share. Fast forward to 12/31/2010 and each share was worth $125.75 on that date, a mere $2.44 or 2% increase over all those years. But now consider that you collected a whopping $20.53 per share in dividends over the same period, increasing your return to 18.6%. Even with dividends reinvested, that only amounts to an average annual total return of about 1.4%; so by comparison collecting a yield above 5% would appear considerably attractive if that yield is sustainable. Lorillard, Inc. (NYSE:LO) is an S&P 500 company, giving it special status as one of the large-cap companies making up the S&P 500 Index.
In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Lorillard, Inc., looking at the history chart for LO below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 5% annual yield.
According to the ETF Finder at ETF Channel, LO makes up 4.17% of the Guggenheim Spin-Off ETF (AMEX:CSD) which is trading lower by about 1.5% on the day Monday. See what other ETFs contain LO » LO operates in the Cigarettes & Tobacco sector, among companies like Universal Corp. (NYSE:UVV) which is down about 0.3% today, and Vector Group Ltd (NYSE:VGR) trading lower by about 1.2%. Below is a three month price history chart comparing the stock performance of LO, versus UVV and VGR.
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The Importance of Dividends
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