COV Dividend Yield Pushes Past 2%

Looking at the universe of stocks we cover at Dividend Channel, in trading on Wednesday, shares of Covidien plc (COV) were yielding above the 2% mark based on its quarterly dividend (annualized to $1.28), with the stock changing hands as low as $63.84 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 12/31/1999 — you would have paid $146.88 per share. Fast forward to 12/31/2012 and each share was worth $142.41 on that date, a decrease of $4.67/share over all those years. But now consider that you collected a whopping $25.98 per share in dividends over the same period, for a positive total return of 23.36%. Even with dividends reinvested, that only amounts to an average annual total return of about 1.6%; so by comparison collecting a yield above 2% would appear considerably attractive if that yield is sustainable. Covidien plc (COV) 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 Covidien plc, looking at the history chart for COV 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 2% annual yield.

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According to the ETF Finder at ETF Channel, COV makes up 7.01% of the iShares U.S. Medical Devices ETF ( IHI) which is trading lower by about 0.6% on the day Wednesday.

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