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Performance Of Dividend Payers Versus Non Dividend Payers In S&P 500

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September 28, 2017 – Comments (0) | RELATED TICKERS: GOOG , SPY , VOO

I recently obtained the data behind the performance behind dividend and non dividend payers in the S&P 500 per year. This is a calculation performed by the index committee that separates members of S&P 500 into dividend paying and non dividend paying, and then equally weighting those portfolios. The performance of an equal weighted portfolio of dividend stocks is compared to the performance of an equal weighted portfolio of non dividend paying stocks

The number of dividend paying stocks has varied over time. Currently, there seem to be 419 companies paying a dividends, out of 505 members of the S&P 500 index ( the difference is due to the inclusion of multiple share classes on the same company – e.g. GOOG and GOOGL)
Most companies paying a dividend are in mature industries. Most dividend stocks tend to be value stocks, which tend to decline by less during bear markets but still provide sufficient upside during bull markets.

Non-dividend paying companies are usually riskier growth type companies, which tend to fall faster and further during bear markets, but can deliver higher returns during bull markets. For a retired investor, there is a higher sequence of returns risk with non-dividend paying stocks, due to the reliance on capital gains only and the volatility in share prices.

It looks like dividend stocks had higher total returns than those of non-dividend paying stocks during that time period. In addition to that, they fell by less during the dot-com bust and the financial crisis.

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