From Nuveen Investments

A Fed Rate Hike:
No Match for Dividend Growers
over the Long Term

Key Insights

Dividend Growers have outperformed in past periods of rising rates

On December 16, 2015, the Federal Reserve increased the Federal Funds rate for the first time in nearly a decade. Although equities have historically underperformed in the short-term following a Fed rate hike, companies that have consistently grown their dividend have shown strong performance over the long term following periods of rising rates.

Performance After the Federal Reserve Increased Rates

Subset of S&P 500 Index, 8 rate hikes since 1972 (1/15/73, 8/31/80, 4/9/84, 9/4/87, 2/4/94, 3/25/97, 6/30/99, 6/30/04)

  • S&P 500 Dividend Growers
  • S&P 500 Non-Dividend Payers
  • S&P 500 Payers with No Change in Dividends
  • S&P 500 Dividend Cutters

Data source: Ned Davis Research, Inc. Further distribution prohibited without prior permission. Copyright 2016 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. The 8 rate hikes listed above reflect the date of the first rate hike of a tightening cycle. A tightening cycle is defined as three consecutive rates hikes without a cut and is only known retrospectively. The performance shown reflects the average performance of each S&P 500 Index category, as defined by Ned Davis Research, Inc., for the 36 months following the first rate hike in each tightening cycle. The performance shown is for illustrative purposes only and does not depict or predict the future performance of these groups or any Santa Barbara strategy. Investors cannot invest in an index. Performance returns may have been negative during this time period. The periods shown do not represent the full history of the S&P 500 Index; it is the history maintained by the data source.

Dividend Policy Description: The performance of each group is based on the equal-weighted geometric average of dividend-paying and non-dividend-paying historical S&P 500 stocks, rebalanced monthly. Each stock’s dividend policy is determined on a rolling 12-month basis. For example, a stock is classified as dividend-paying if it paid a cash dividend at any time during the previous 12 months. A stock is reclassified only if its dividend payments change. Dividend growers and initiators include stocks that raised their existing dividend or initiated a new dividend during the preceding 12 months. Dividend cutters or eliminators include stocks that lowered their existing dividend or stopped paying regular dividends during the preceding 12 months. The returns do not reflect the deduction of any fees, expenses or taxes that would reduce performance in an actual client portfolio. Returns for stocks that paid dividends assume reinvestment of all income. It is not possible to invest in an index. These groups have been determined by Ned Davis Research, Inc. Further distribution of this information is prohibited without prior permission. Copyright 2016 © Ned Davis Research, Inc. All rights reserved.


The S&P 500® is a market weighted index of 500 stocks that are traded on the NYSE, AMEX, and NASDAQ.

Risks and Other Important Considerations

This information should not be relied upon as investment advice, recommendations, offers or solicitation of any particular security, asset class, fund, strategy, or investment product. Investing entails risk, including the possible loss of principal. There can be no assurance that any investment or asset class will provide positive performance over any period of time. Dividend yield is one component of performance and should not be the only consideration for investment. Dividends are not guaranteed and will fluctuate. Equity investments such as large-cap stocks are subject to market risk or the risk of decline in response to adverse company news, industry developments, or a general economic decline. Investments in small- and mid-cap companies are subject to greater volatility. Non-U.S. investing presents additional risks such as the potential for adverse political, currency, economic, social or regulatory developments in a country including lack of liquidity, excessive taxation, and differing legal and accounting standards. Past performance does not guarantee future results.

The statements contained herein reflect the opinions of Santa Barbara Asset Management, LLC (“Santa Barbara”) as of the date written. Certain statements are forward looking and/or based on current expectations, projections, and information currently available to Santa Barbara. Such statements may or may not be accurate over the long-term. While we believe we have a reasonable basis for our comments and we have confidence in our opinions, actual results may differ from those we anticipate. We cannot assure future results and disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Statistical data was taken from sources which we deem to be reliable, but their accuracy cannot be guaranteed.

Santa Barbara Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen, LLC.