Photo: PBS Nightly Business Report
Dividend paying stocks are typically associated with mature, slow growth companies that have no better use for cash than to just pay it out to shareholders. These stocks are for old people who need income and can’t handle volatility.However, since the beginning of 2000, dividend payers have been absolutely killing it.
During the period, the S&P 500 is down 21%. If you had reinvested the S&P 500 dividends, your total return would’ve been -2%.
If you had invested in the S&P 500 Dividend Aristocrats—large-cap stocks that have increased dividends annually for the last 25 years—then you would be up 119%. These stocks include names like Kimberly-Clark, Walmart, and McDonald’s.
Sam Stovall, S&P Capital IQ’s Chief Equity Strategist, was on PBS’s Nightly Business Report :
I think what explains it is paying up for quality by focusing on those companies that have consistently increase their earnings and dividends. They’re not going to be in your high-beta or high-volatile groups. They’re not the companies in a sense that are fly-by-nights. They are your blue chip stocks that do pay a dividend yield and because of that you get to compound that growth. More than 45 per cent of the total return of the S&P comes from reinvested dividends and when you get solid companies behind them, then the price goes along with it.
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