Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Click for Bio

Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 

  It’s Back To The Future With Dividend-Paying Stocks
Posted Under: Stock Dividends

 
View from the Observation Deck 
  1. Dividend-paying stocks have held their own against the broader market over the past decade.  
  2. From 2/04-2/14, the Dow Jones U.S. Select Dividend Index (DJDVY), a commonly used benchmark for dividend-paying stocks, posted a cumulative total return of 94.9%, compared to 99.8% for the S&P 500.
  3. The strong showing has prompted some in the financial media to argue that valuations on dividend-paying stocks have reached levels too rich to justify the potential risks to investors' capital.
  4. U.S. News & World Report published such an argument on 8/9/12 in an article titled "Time to Ditch Dividend Stocks?" From 8/9/12-3/24/14, DJDVY posted a cumulative total return of 33.9%.
  5. Others have questioned the prospects for dividend-paying stocks once the Federal Reserve begins to tighten monetary policy. That has become a hotter topic following Chairwoman Janet Yellen's comments last week.
  6. The last time the Federal Reserve tightened the federal funds rate was from 6/04-6/06, a total of 425 basis points. DJDVY posted a cumulative total return of 22.3% over that 24-month period.
  7. While we often like to point out that the more things change the more they stay the same for those investors with a long time horizon, we do want to acknowledge one important change (see chart).
  8. Over the past decade or so, the Information Technology sector has gone from contributing the second least amount (5.14%) to the S&P 500's dividend payout to becoming its largest sector contributor at 14.99%. 
This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance, while the S&P Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector. The Dow Jones U.S. Select Dividend Index represents the most widely traded of the market's highest-yielding stocks.

To Download a PDF of this post, please click here.
Posted on Tuesday, March 25, 2014 @ 4:28 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Weekly Market Commentary
Weekly Market Watch
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
US Economy and Credit Markets Week Ended Mar. 21, 2014
US Stocks Week Ended March 21, 2014
Rebound In Agriculture Prices Right On Cue
S&P 500 Top-Line Growth Estimates
Individual versus Institutional Investors
US Economy and Credit Markets Week Ended Mar. 14, 2014
US Stocks Week Ended March 14, 2014
I’ll Just Have Water, Thank You
Passive Investment Vehicles Continue To Post Big Gains In Asset Growth
Happy 5th Anniversary to the Bull Market
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2021 All rights reserved.