FORTUNE — All of a sudden, the market for initial public offerings seems to be dominated by stocks only widows and orphans used to love.
In the past six months, nearly half of all companies that sold shares through an IPO, or 26 in total, have paid a dividend. Some are pretty big. For instance, Zais Financial Corp. (ZFC), a REIT that went public in early February, is expected to pay a dividend of $4.64 a year, for a yield of 22%. Its shares are up 5% since they went public.
Seaworld, too, which plans to go public in one of this week’s biggest deals, has said it will pay shareholders a dividend of $0.80 this year, for a dividend yield of about 3% based on the company’s offering price range.
Dividends are not normally associated with the IPO market, though even in normal times about a quarter of all IPOs do tend to pay some sort of income. Dividends are usually considered catnip for relatively conservative investors, often those in need of income. The IPO market, on the other hand, is typically dominated by faster growing, younger companies. These companies don’t usually have to pay out a dividend to attract investors.
But low rates are making odd investing bedfellows.
For the past year or so, dividend paying stocks have done well in general, rising more than rest of the market. And the IPO market tends to be a follower.
“There’s a thirst for yield,” says Brian Reilly, who heads up equity capital markets at investment bank Barclays. “That’s always the case with retail investors. But institutional investors are more interested in yield these days too. And with the market improving, more people are willing to take on equity risk in order to get the dividend.”
Technology IPOs, too, which don’t tend to pay dividends and usually make up a good portion of the market for new issues, have been relatively rare in the past year. Also investors have been looking to play the rebound in the real estate market. That’s boosted the demand for dividend-paying real estate investment trusts (REITs) and master limited partnerships (MLPs), which have made up a much larger than usual part of the IPO market.
The changing makeup of the IPO market is also shaking up the traditional ranks on Wall Street. Barclays (BCS), which has long been seen as the go-to bank for REITs and MLPs, jumped to the lead underwriter of all IPOs in the first quarter. It was ranked eighth in the quarter a year ago.
Jim Paulsen, a strategist at Wells Capital, thinks the IPO market may be coming late to the income party. An improving economy is likely to shift investors away from dividend-paying stocks and back to companies more focused on growth. “There are two things driving dividend paying stocks — low interest rates and the fact that investors have been unwilling to take risks,” says Paulsen. “One of those things will probably change pretty soon, and likely both.”
Still, bankers say at least for now the demand for dividend stocks from traditional IPO investors remains high, and that can continue. The biggest reason: We’re just not in an economy that is likely to produce a lot of growth companies.
“Companies with strong cash flows that can be converted into returns through dividends are going to continue to be in high demand,” says Mary Ann Deignan, who heads up Americas equity capital markets at Bank of America Merrill Lynch. “The IPO market is wide open for those stocks.”
Some would say too wide open. Among the REITs that have sold shares in the market have been a rush of companies that buy up mortgages. Earlier this year, Federal Reserve governor Jeremy Stein said he worried that a rush of investor money into mortgage REITs could fan a new debt bubble. Other companies, in order to attract dividend investors, are pushing the envelop of what is normally considered a REIT. Earlier this month, Hannon Armstrong said it plans to sell shares in an IPO. The company is in the business of financing solar, wind, and other clean energy projects. Nonetheless, it is selling shares as a REIT.
One banker warns that some rivals in the IPO market are trying to disguise bad business with big dividends. That’s a sign the IPO market could be headed for trouble. For now, though, he says that’s still a minority of offerings. But knowing Wall Street, it’s only a matter of time.