The TRUTH About Dividends 🔥
What 94 Years of Market History Tells Us About Dividend Stocks 📊
Dividend investing is an incredibly powerful way to build wealth.
But I still see many people misunderstanding the true power behind dividend investing.
Hartford Funds recently conducted one of the most in-depth research studies on dividend stocks over the last 94 years.
What they found reveals the truth about dividend stocks.
1. 💥 Power of Compounding Dividends
Since 1960, a staggering 85% of the S&P 500's cumulative return has come from reinvested dividends and the power of compounding.
$10,000 invested in the S&P 500 in 1960 without reinvesting dividends?
Turned into $982,072.
$10,000 invested in the S&P 500 in 1960 while reinvesting dividends?
Turned into $6,399,429.
2. 📈 Dividend Growth Outperforms
From 1973 to 2024, companies that grew or initiated dividends produced the highest total returns (10.2%/year).
Why would this be the case?
Think about what a stock growing its dividend often means:
Cash flow can cover the dividend
Management is confident earnings will continue to grow in the future
It forces management to focus on the highest ROI projects
Management is focused on long term objectives
Remember: Dividend growth and share price appreciation are byproducts of free cash flow growth.
3. 🧘 Dividend Growth Stocks Are Less Volatile
Not only have dividend stocks provided better historical returns-
They have also been less volatile. (Lower beta and lower standard deviation)
This is even more evident with dividend growth stocks.
4. 🏦 Institutional Investors Are Turning to Dividends
Since the Global Financial Crisis, there’s been a striking divergence between institutional and retail investors when it comes to income strategies.
Institutional investors have poured nearly $47 billion into equity-income funds since 2008.
Meanwhile, retail investors have pulled out nearly $123 billion from those same funds over that same time frame.
Are institutions ahead of the curve?
5. 📊 Dividends’ Contribution to Total Return
From 1940–2024, dividend’s contribution to the total return of the S&P 500 Index averaged 34%.
In the 1940s and 1970s, dividends accounted for over 60% of the total returns.
And in the 2000’s… The S&P 500 had negative returns.
Dividends were the only source of positive return that decade.
That’s exactly why living off dividends can help protect retirees from sequence of return risk. If you don’t know what sequence of return risk is, you have to read this — it’s a must for anyone planning to live off their portfolio.
🚫 Dividends Aren’t a Gimmick
The data is clear.
Dividend-paying stocks have some undeniable, data-backed advantages over non-dividend payers:
📈 A growing stream of income
💰 Better long-term total returns
🧘 Lower volatility
🛡️ Resilience during lost decades
🏦 Growing institutional demand
👴 Protection against sequence of return risk
But beyond the numbers, there’s a mindset shift.
Dividend investing isn’t about hype.
It’s about owning real businesses that generate real profits and return that cash to shareholders.
It forces you to think long-term.
It forces you to think about business quality.
And it forces you to think more about fundamentals vs market sentiment.
I’m building a portfolio of of quality businesses, that grow their dividend payments year after year.
Stocks that will allow me to one day live off dividends.
If you are looking to do the same, then you are in the right place.
Check out these resources:
Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)
Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)
Seeking Alpha 🔥 (My favorite investment research platform!)
The Dividend Report 📊 (Free Newsletter for Straightforward Dividend Stock News)
Other News:
At the start of every month, I send out a newsletter to my paid newsletter subscribers with a list/spreadsheet of all the dividend stocks that I believe to be currently undervalued.
If you’d like to receive this sheet, you can sign up here:
That’s all for now!
See you next week!
Dividendology 🚀
This is a great post!
My dividend stock is also a growth stock, price volatility is high.