Next bubble looming in dividend stocks?

Dividend paying stocks have been on a decline –  I mean … the yield, of course. With interest rate around the world seems to remain low for at least until 2014, we could see people rushing for yield to get their returns and this would ultimately lead to yield compression. Remember during the GFC time when some yield on stocks would represent 20 – 25%? Now it is nowhere even half near that high. What we are looking at now is only between the range of 5 – 6% at best.

REIT	Aug-12	Dec-11	Gain
FCOT	$1.120	$0.740	51.4%
Fortune Reit HK$	$5.630	$3.760	49.7%
AIMSAMPIReit	$1.305	$0.945	38.1%
K-REIT	$1.120	$0.830	34.9%
CapitaComm	$1.420	$1.055	34.6%
SuntecReit	$1.445	$1.075	34.4%
First REIT	$1.000	$0.760	31.6%
CDL Htrust	$2.030	$1.545	31.4%
MapletreeLog	$1.110	$0.845	31.4%
Cambridge	$0.620	$0.475	30.5%
StarHill	$0.735	$0.565	30.1%
MCT	$1.100	$0.850	29.4%
Ascendasreit	$2.360	$1.830	29.0%
CapitaRChina	$1.480	$1.150	28.7%
MIT	$1.360	$1.075	26.5%
AscottREIT	$1.250	$0.990	26.3%
LippoMapleT	$0.435	$0.350	24.3%
FrasersCT	$1.785	$1.440	24.0%
Sabana REIT	$1.045	$0.875	19.4%
CLT	$1.125	$0.950	18.4%
CapitaMall	$1.980	$1.700	16.5%
SaizenREIT	$0.158	$0.140	12.9%
PLife REIT	$1.920	$1.790	7.3%
FE-Htrust	$0.985	$0.930	5.9%
A-Htrust	$0.890	$0.880	1.1%

Bubbleologists may be misreading the dividend frenzy. Both the anti and the advocates generally
attributes the latest rush to dividends as a result of the persistent Euro
crisis and recent hiccups in the China growth story. Fearing a global slowdown,
the thinking goes, investors are shifting out of economy-sensitive cyclical stocks such as commodities (Noble, Wilmar, Olam, Sakari) and shipping (NOL, Cosco, YZJ) in particular into
sectors like utilities, telecoms (Singtel, Starhub), REITS and consumer staples (SPH, etc) — considered defensive in nature because of
their maturing business and steady cash-flow even in hard times and their commitment to paying a
dividend.

Yet this defensive shift is but a small part of the story. What’s really driving
the trend to dividends is the low yield environment that has almost everyone, not just the retirees now, so desperate to secure an income stream that they have begun moving
up the risk ladder. With the 10-year Singapore bond yield trading at a record low of
1.3% and bank fixed deposits paying close to peanuts, the dividend bubble may yet takes its time to slowly form a bigger bubble and until then we will happily wait cause this bubble will not burst for a while now.