Investors Get Paid for Holding Dividend Stocks
by | Posted 4.9.2012 | Post Comment (No Comments)

In a previous article I discussed that I use S&P 500 as my benchmark for dividend returns and total returns. One of the drawbacks of this comparison is the fact that sometimes the composition of the index is out of sync with the composition of a typical dividend growth portfolio. For example, in the late 1990’s and early 2000’s, technology stocks which paid no dividends were added to S&P 500, which diluted the yield. In 2008 and 2009, a large portion of financial companies cut or eliminated distributions, months before the market started crashing. For example, Citigroup (C) cut its dividend in January 2008, while the market was still close to multi-year highs. As part of my strategy, I usually sell when a stock I hold cuts or eliminates distributions. However, using data from the S&P 500 as a proxy for the stock market, one can still draw valuable conclusions about dividend investing in general.

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