re: Dividends, You Have It Backwards

The taper talk that began earlier this summer has led to many investors racing away from dividend-paying stocks under the false impression that:

a) less QE is means much higher interest rates

and

b) dividend stocks would underperform thanks to competition from bonds which would now be paying higher yields

This line of thinking is precisely backwards – because nominal yield is not the same thing as total return.

Ned Davis (via BlackRock) has run the numbers – it turns out that high-paying dividend stocks outperform non-paying stocks in both neutral rate environments and in rising rates – the opposite of what many people currently believe…

From BlackRock:

Dividend paying stocks in the S&P 500 returned 2.2% annualized during such times of tightening (increasing rates), while non-dividend stocks in the S&P gained 1.8%, according to Ned Davis Research. On the other end of the spectrum, during periods of easing (declining rates) by the Federal Reserve, dividend payersgained 10.2% annualized and non-dividend payers lost 1.3%. During times of neutral Fed policy is when dividend payers have performed best, returning 12.3% versus 6.2% for non-dividend stocks. There is no guarantee that stocks will continue to pay dividends.

While I don’t believe the excessively rich valuations people had been paying for utilities and telecom stocks made sense, I also don’t believe the wholesale dumping of dividend stocks every time Bernanke made a hawkish statement was warranted either.

Source:

Dividends: Keeping Calm and Paying On (BlackRock)

What's been said:

Discussions found on the web
  1. bitcoin era wikipedia commented on Sep 25

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  2. best travel pillow commented on Oct 29

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  3. Online smoke shop commented on Oct 30

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  4. buy cc commented on Oct 31

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  5. royal bank online commented on Nov 29

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  6. collection kit commented on Dec 01

    … [Trackback]

    […] Read More Info here on that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  7. td online account commented on Dec 06

    … [Trackback]

    […] Here you can find 65429 additional Info to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  8. 토토사이트 commented on Dec 11

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  9. td easyweb sign in commented on Dec 24

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  10. fake watches commented on Dec 31

    … [Trackback]

    […] There you will find 92621 more Information on that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  11. Daily Football Tips commented on Jan 15

    … [Trackback]

    […] There you will find 93175 more Info to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]

  12. Genius Maxfire MiniPad Pro manuals commented on Jan 21

    … [Trackback]

    […] Here you will find 1795 more Information to that Topic: thereformedbroker.com/2013/07/20/re-dividends-you-have-it-backwards/ […]