Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Dividend Stocks: How to Soften the Bear's Short-Term Bite

Stock-Markets / Dividends May 22, 2012 - 06:52 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleLarry D. Spears writes: For investors, May started out as a month of great promise. On May 1, the Dow Jones Industrial Average climbed 65.69 points, closing at 13,279.

Since then, however, that promise has turned to plummet.

The Dow posted losses on 12 of the next 14 trading days, culminating with a drop of 46 points last Friday. In all, since May 1, the Dow has lost 6.17%.

But did you know there was a way you could have avoided the bulk of the damage?

All you had to do was hold the dividend stocks in the 30-stock DJIA that offer the highest current yield.

In fact, numerous academic studies have verified the impressive contribution of dividend stocks to long-term market performance. According to certain studies, dividend yields have been responsible for as much as 90% of stock returns over the past century.

And Standard & Poor's reported last year that the dividend component was "responsible for 44% of the total return" of the S&P 500 over the 80 years from 1930 through 2010.

That is quite impressive considering nearly a third of S&P stocks don't even pay a dividend.

Dividend Stocks and Downturns
However, what these studies don't show is just how effective dividends can be in cushioning the impact of a short-term decline in stocks - both in terms of resisting downward price pressure and offsetting capital losses.

So, let's look at some numbers from this month as the Dow Jones Industrial Average as a whole fell 836.83 points, or 6.30%, from May 1 to May 17.

Keep in mind, of course, that they're not based on a scientific study, but rather casual observation.

What you'll learn may make you see dividend stocks in a different light.

During the recent slide, the 10 Dow stocks offering the highest dividend yield on May 1 lost just 3.91% of their combined value during that same period.

To be precise, those 10 stocks had a combined (unweighted) price of $535.94 at the May 1 close, and offered a total annual dividend payout of $19.36 a share, providing a yield of 3.61%.

By the close May 17, the combined price of those same 10 stocks had fallen just $20.98, to $514.96 (which pushed the yield up to 3.76%).

What's more, three of those 10 stocks actually rose in price during the broad market sell-off:

•AT&T Inc. (NYSE: T), with a dividend of $1.76 for a yield of 5.28%, edged up from $33.06 to $33.29.
•Verizon Communications Inc. (NYSE: VZ), with a dividend of $2.00 and a yield of 4.93%, climbed from $40.56 to $41.37.
•The Procter & Gamble Co. (NYSE: PG), with a dividend of $2.25 and a yield of 3.54%, rose from $63.57 to $63.96.
By contrast, the 10 Dow stocks offering the lowest dividend yield on May 1 lost 8.45% of their combined value, more than 2 percentage points worse than the DJIA as a whole - and nearly 5% more than the high yielders.

Specifically, those 10 stocks had a combined price of $607.87 at the close May 1, and offered a total annual dividend of $10.56, for an average yield of just 1.73%. By the end of the day on May 17, the combined price of the low yielders had dropped $51.36 to just $556.51.

Only one of those stocks - The Walt Disney Co. (NYSE: DIS) - managed a small gain, rising from $43.79 to $44.33.

Dividend Stocks Ease Losses
To further accent the value of dividends, consider just one more thing:

If the year ended right now, with no further price moves, the $19.36 in dividends paid out by the 10 top-yielding Dow companies would offset all but $1.62 of the capital loss suffered by investors holding them - meaning their negative return would be just 0.3% of the May 1 value.

Under the same circumstances, investors holding the 10 lowest-yielding Dow stocks would have received just $10.56 in dividends to counter their $51.36 decline in share value, giving them a net loss of $40.80 - and a negative return of 6.71%.

I'd also be willing to bet the differences in return between high- and low- (or no) dividend payers would be even greater among S&P 500 stocks, and truly substantial on the Nasdaq, which has the lowest percentage of dividend-paying companies.

Of course, there's no guarantee these differences will hold up in the next sharp short-term pullback, but the numbers do make one thing extremely clear:

Dividend stocks offer far more to investors than just a modest quarterly check - both defensively and in terms of net total return.

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules