Monday, November 04, 2019

Dividend Payers A Winning Strategy In A Volatile Equity Market

Now that the S&P 500 Index seems to be making a habit of reaching new highs on a more frequent basis, the journey has been anything but a smooth one. One area of the market that provided for a less bumpy ride was in the dividend paying stocks. Simply evaluating the return in a few of the dividend paying strategies since the market's peak in late September of last year, a couple of the dividend paying strategies still are outperforming the total return of the S&P 500 Index as seen in the below chart.

The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is up 11.8% since 9/30/2018 versus the S&P 500 return of 7.6%.

Not all but a large portion of the outperformance came in the fourth quarter last year when the S&P 500 Index fell 13.5% while the SPDR Dividend ETF (SDY) and NOBL returned -7.9% and -8.7%, respectively.

With the start of the fourth quarter and a more risk on mood by investors, the dividend payers are lagging the broader market.

Over time though, but no guarantees, the dividend payers tend to hold up better in down markets. When this occurs, the payers have less ground to make up when the market recovers and the payers thus have a propensity to outperform over the complete market cycle and more so on a risk adjusted basis.

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