These names are barely treading water against other income investments (and certainly not keeping up with the 7.2% average year-to-date dividend growth in the S&P 500).
Several years back, famed investor Peter Lynch was quoted as saying: “insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
These companies generate the cash flow to cover their lofty dividend payments. In addition, there appears to be room for investors to further gain through either future payout increases or when the market realizes that such a large risk premium isn’t necessary.
Price momentum is important for traders looking to make a quick hit in days or weeks, but fundamental momentum can help investors generate a steady and growing amount of dividend income over a period of years.