The most recent 5-year time period experienced a 3.7% higher annualized return with 11.8% lower risk than the long-term historical average.
With the likelihood of rising market volatility growing, investors could benefit with dividend growers.
History shows since 1926 that 90% of the time there are more than just 1 negative quarter over a 3-year time frame. Therefore, a focus on the downside may help preserve capital when the markets do turn negative
Since 1930 no other decade has experienced as few negative quarters as the 2010s.
Why you shouldn’t fear negative months – a long-term approach yields a 7.4% annualized return.
While the likelihood of additional Fed interest rate hikes is continually changing based on the market environment, dividend growers have outperformed in past periods of rising rates.
Regardless of the market’s reaction to rising rates, dividend growers have provided better upside and downside capture than dividend yielders.
Dividend growth (rather than focusing on yield) might be the better option when rates rise.
Historically, dividend growers have outperformed when the yield curve has inverted, as well as during subsequent recessions.
Relative to the S&P 500, dividend paying companies are trading near their largest discount over the past 5 years. On the contrary, non-dividend payers are trading near their largest premium relative to the index.
Dividends have contributed more than just yield to total return.
Historically after a recession the number of S&P 500 Index companies that grew or initiated their dividend generally increased and the number of companies that cut or eliminated their dividend decreased.
Only 25% of the dividend paying companies in the S&P 500 have increased their dividend for at least 10 years.
Focusing on company fundamentals may help identify dividend cutters, as well as opportunities for dividend growth.
No single dividend yield category leads in all markets, and the top performers change over time. Investing broadly across a wide range of yields may help reduce risk in an overall portfolio.
42% of the dividend paying companies in the S&P 500 currently yield below the Index.
Dividend yields in all major developed markets are above their long-term averages with yields of some countries being nearly 15% higher than their 20-year average.
Dividend yields of international stocks have on average been more than 50% higher than dividend yields of U.S. stocks since 2008.
In both up and down markets, dividend growers have outperformed 100% of the 10-year rolling time periods.
During drawdowns of 7% or greater, high-quality companies have typically outperformed the S&P 500 Index over the last 10 years.
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