Ideas & Insights

Dividend-Paying Equities

Not All Dividend-Paying Stocks Are Created Equal

Dividends have historically added to total return in robust markets and, more importantly, provided an income
cushion against market downturns.

As illustrated in the below chart, companies in the S&P 500 Index with policies of increasing shareholder (Log Scale)

distributions have outperformed the equal-weight S&P 500 Index by 2.3% annually and outperformed non-
dividend-paying stocks by a shocking 7.2% annually (1/31/1972 - 12/31/2018).1 $7,943
$6,310

Hypothetical Growth of $100 $3,981

S&P 500 Stocks by Dividend Policy1

$2,512
Monthly Data 1/31/1972 – 12/31/2018

Dividend Growers & Initiators $1,585

Gain Per Annum = 9.6% ($100 Grows To $7,499)
All Dividend-Paying Stocks $1,000
Gain Per Annum = 8.8% ($100 Grows To $5,227)
Dividend Payers w/No Change in Dividends $631
Gain Per Annum = 6.9% ($100 Grows To $2,285)
Dividend Cutters & Eliminators $398
Gain Per Annum = -0.8% ($100 Grows To $69)
Non-Dividend-Paying Stocks $251
Gain Per Annum = 2.4% ($100 Grows To $306)
S&P 500 Geometric Equal-Weighted Total Return Index $158
Gain Per Annum = 7.3% ($100 Grows To $2,741)

$100 $100

$63

$40
It is not possible to invest directly in
an index. Past performance does
$25
not guarantee future results. Please Returns based on monthly equal-weighted geometric average of total returns of S&P 500 component stocks, with
see reverse for additional important components reconstituted monthly.
information.

Source: Ned Davis Research, Inc., S&P Capital IQ Compustat © Copyright 2019 Ned Davis Research, Inc. Further distribution prohibited without prior
permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

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 ANot
Brief All Dividend-Paying
History Stocks
of the U.S. Financial Are
Markets Created Equal
S&P 500 Index Price, Income and Total Return
By Decade and Annually from 2010–2018 (%)

•H
 istorically, dividends have contributed a substantial
portion of total market return – 42.4% of the total return
on the S&P 500 Index from 12/31/1929 through
12/31/2018.

•M
 ore specifically, the S&P 500 without dividends
1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010 2011 2012 2013 2014 2015 2016 2017 2018
returned an average 5.5% per year during this period,
Price Return -5.3 3.0 13.6 4.4 1.6 12.6 15.3 -2.7 12.8 0.0 13.4 29.6 11.4 -0.7 9.5 19.4 -6.2 versus a total average annualized return (including
Income Return 5.6 6.0 5.6 3.3 4.1 4.8 2.8 1.8 2.3 2.1 2.6 2.8 2.3 2.1 2.4 2.4 1.9
Total Return 0.3 8.9 19.2 7.7 5.7 17.4 18.1 -1.0 15.1 2.1 16.0 32.4 13.7 1.4 12.0 21.8 -4.4
reinvestment of dividends) of 9.5%.

By Decade By Year

Source: Ned Davis Research and Standard and Poor’s. It is not possible to invest directly in an index. Past performance does not
guarantee future results. The return of the price index is referred to as capital appreciation. Income return is assumed to be the Index’s
total return minus its capital appreciation. Total Return = Capital appreciation plus reinvested dividends during the time period.

Trade-Offs and Risks: Dividend Payment Risk: An issuer of a security may be unwilling or unable to pay income on a security. Common stocks do not assure dividend payments and are paid only when declared by an issuer’s
board of directors. The amount of any dividend may vary over time. Market volatility. A company’s stock price, whether dividend-paying or not, may move up or down depending on various market conditions. Therefore, the
initial principal invested may be worth less when an investor decides to sell, depending on the market value of the underlying holding. Loss of income. A company may choose to skip or suspend dividend payments. In this
case, shareholders lose the investment income and might also see the value of their shares fall if income-oriented investors sell their holdings. Underperformance. During market rallies, dividend stocks historically lag the broader
market, causing investors to accept relatively lower return potential in exchange for less volatility and income. Increase in income tax rates. The current dividend tax rate is subject to legislative changes. Please consult your tax
advisor regarding the taxation of dividends.
S&P 500 Index: The S&P 500 Index is an unmanaged market capitalization-weighted index used to measure 500 companies chosen for market size, liquidity and industry grouping, among other factors.
1. Dividend-Paying vs. Non-Dividend-Paying Stocks: Each stock’s dividend policy is determined by its indicated annual dividend. Ned Davis Research classifies a stock as a dividend-paying stock if the company indicates
that it is going to be paying a dividend within the year. A stock is classified as a non-payer if the stock’s indicated annual dividend is zero.
The index returns are calculated using monthly equal-weighted geometric averages of the total returns of all dividend-paying (or non-paying) stocks. A stock’s return is only included during the period it is a component of the
S&P 500 Index. The dividend figure used to categorize the stock is the company’s indicated annual dividend, which may be different from the actual dividends paid in a particular month.
Dividend-Growing, No-Change-In-Dividend, and Dividend-Cutting: Dividend Growers and Initiators include stocks that increased their dividend anytime in the last 12 months. Once an increase occurs, it remains classified
as a Grower for 12 months or until another change in dividend policy. No-Change stocks are those that maintained their existing indicated annual dividend for the last 12 months (i.e., companies that have a static, non-
zero dividend). Dividend Cutters and Eliminators are companies that have lowered or eliminated their dividend anytime in the last 12 months. Once a decrease occurs, it remains classified as a Cutter for 12 months or until
another change in dividend policy.
This publication is provided for informational purposes only and does not pertain to any security or service and is not an offer or solicitation of an offer to sell any product or service. Unless otherwise stated, all information and
opinions contained in this publication were produced by Advisors Asset Management, Inc. (AAM) and other sources believed by AAM to be accurate and reliable. Due to rapidly changing market conditions and the complexity
of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of
opinions are subject to change without notice. All AAM employees, including research associates, receive compensation that is based in part upon the overall performance of the firm. AAM may make a market in or have
other financial interests in any given security with which this analysis suggests may be benefited from its conclusions. Investors should seek financial advice regarding the appropriateness of investing in any security or investment
strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Past performance does not guarantee future performance. Nothing contained herein
constitutes investment, legal, tax or other advice. This should not be construed as a solicitation.
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