Yes, Virginia, Dividends DO Matter!
Happy Monday to one and all!
While at the gym this morning, I watched a news item about today being Cyber Monday. The first business day after Black Friday. While many people were out shopping on Friday for Christmas gifts, there were many who do not (yours truly among them). However, a new trend has emerged that today, Cyber Monday, is the biggest sales day online.
It is estimated that 75% of all office workers will shop online today, WHILE AT WORK! So, while nothing gets done of Friday because everyone takes a day off of work, nothing gets done today either. So, if you are not among the shopping AND you cannot get your work done because certain items are being delayed because of Cyber Monday shoppers, then don't join the ranks of the unproductive; bone up on your financial education.
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Now, I also want my stock portfolio, particularly the core portion of my portfolio, to be productive just like employees. You see, I look at stocks like a look at properties. I want to form a core group of dividend paying stocks (rent) and then round out my trading with short term plays and options (flips and wholesales).
And yes, those dividends do indeed matter!
According to research conducted by Jeremy J Siegel, Wharton Professor and author of several stock investing books including The Future For Investors, reinvested dividends account for 97% of the total return on stocks. Capital Gains account for a mere 3%! Professor Siegel's researched covers all of the stocks that traded on the exchanges going back to 1871. Going back 50 years, when ranking stocks by dividend yield, the top 20% (meaning the stocks that paid the highest % dividends) return 14.3% annualized while the 20% of stocks with the lowest yields (meaning that they paid no dividends) return 9.5%. This is quite a difference. In fact, on a $1,000 investment made in 1958, the dividend portfolio would have grown to $462,750; while the non-dividend portfolio would only have accumulated $64,930.
So, YES DIVIDENDS DO MATTER!
In fact, dividends will matter even more NOW! It has been shown through numerous studies that dividend paying stocks perform even better in down markets than they do in up markets relative to other stocks. So, for this purpose dividend paying stocks act as protection in a down market. Dividend paying stocks are often purchased by institutional investors in large quantities when they feel that the market is about to go into a poor performing environment. This is what is known as a "flight to quality." When the market is down, my investments still SHOW ME THE MONEY! And often, when investors start to return, they are typically buying dividend paying stocks first.
Buying on top of buying leads to higher stock prices.
Notes from the Underground:
Dow 13,003.15 +22.27
Gold 826.60 +3.50
Silver 14.81 +0.02
Oil 97.47 -0.71
To Your Investing Success,
Patrick
While at the gym this morning, I watched a news item about today being Cyber Monday. The first business day after Black Friday. While many people were out shopping on Friday for Christmas gifts, there were many who do not (yours truly among them). However, a new trend has emerged that today, Cyber Monday, is the biggest sales day online.
It is estimated that 75% of all office workers will shop online today, WHILE AT WORK! So, while nothing gets done of Friday because everyone takes a day off of work, nothing gets done today either. So, if you are not among the shopping AND you cannot get your work done because certain items are being delayed because of Cyber Monday shoppers, then don't join the ranks of the unproductive; bone up on your financial education.
******************************************************************************************
Now, I also want my stock portfolio, particularly the core portion of my portfolio, to be productive just like employees. You see, I look at stocks like a look at properties. I want to form a core group of dividend paying stocks (rent) and then round out my trading with short term plays and options (flips and wholesales).
And yes, those dividends do indeed matter!
According to research conducted by Jeremy J Siegel, Wharton Professor and author of several stock investing books including The Future For Investors, reinvested dividends account for 97% of the total return on stocks. Capital Gains account for a mere 3%! Professor Siegel's researched covers all of the stocks that traded on the exchanges going back to 1871. Going back 50 years, when ranking stocks by dividend yield, the top 20% (meaning the stocks that paid the highest % dividends) return 14.3% annualized while the 20% of stocks with the lowest yields (meaning that they paid no dividends) return 9.5%. This is quite a difference. In fact, on a $1,000 investment made in 1958, the dividend portfolio would have grown to $462,750; while the non-dividend portfolio would only have accumulated $64,930.
So, YES DIVIDENDS DO MATTER!
In fact, dividends will matter even more NOW! It has been shown through numerous studies that dividend paying stocks perform even better in down markets than they do in up markets relative to other stocks. So, for this purpose dividend paying stocks act as protection in a down market. Dividend paying stocks are often purchased by institutional investors in large quantities when they feel that the market is about to go into a poor performing environment. This is what is known as a "flight to quality." When the market is down, my investments still SHOW ME THE MONEY! And often, when investors start to return, they are typically buying dividend paying stocks first.
Buying on top of buying leads to higher stock prices.
Notes from the Underground:
Dow 13,003.15 +22.27
Gold 826.60 +3.50
Silver 14.81 +0.02
Oil 97.47 -0.71
To Your Investing Success,
Patrick
posted by Dusan at
6:52 AM
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