Source: Ned Davis Research 31/1/72-30/6/19. Returns based on monthly equal-weighted geometric average of total returns of the S&P500 component stocks with components reconstituted monthly.
To be able to pay a dividend, generally a company must have a strong balance sheet, consistent cash flow and excess available cash. These attributes also make them great investments regardless of their dividend.
Investors are always searching for great investments and hence their fundamental characteristics attract all investors which tends to cause their stock price to rise.
With Dividend Paying stocks you get the best of both worlds. Not only can you experience significant capital price appreciation but you also get an income stream and if you add that income stream back into your returns the outperformance is significant.
Consider the S&P500 Index verses the S&P500 Total Return Index. The Total Return Index includes the value of dividends whereas the basic index does not.
From the period 1 July 1990 to 1 July 2019 we found
Source: Data S&P Dow Jones Indices. Calculation by Capital 19
These calculations are in line with the findings of the Ibbotson Associates Yearbook in 2001 where they said for the period 1926-2001, dividends accounted for 40% of the S&P500’s total return.
All of this research points to the same thing – dividends matter and can make a significant difference to your overall returns.
Using the Ned Davis research numbers above, had you invested $100,000 in non-dividend paying stocks 40 years ago, your portfolio would be worth $299,464 now.
However, if you had invested that $100,000 in the dividend growers 40 years ago, your portfolio would be worth $4,364,230 now¹
That is a significant difference and why we think the dividend growers list is a great place to start looking for your next investment.
¹ Calculations for the purpose of illustration only and not to be taken in any other context.
But how do you find the best dividend-paying stocks to buy among the more than 2,100 available?
We do the work for you! We search all dividend paying stocks against our key metrics and pick just the top 24 that pass our rigorous tests.
As a client of Capital 19, you can receive details of these top 24 stocks and also weekly updates about how they are performing and whether we deem them still worthy to be in that list.