Historically, companies with growing dividends have outperformed non-dividend payers by a wide margin, and have done so with less risk.
Dividend growers’ historical return advantage
Dividends have been a crucial component of equity returns over the years, but there is more to dividends than just their cash value. A stable, growing payout is a clear signal that management is confident in the company’s financial health and future earnings prospects. Over time, stocks that grow their dividends have historically generated better returns with less risk than non-dividend paying stocks.
Dividend-focused investing for the long term
We believe that high-quality, dividend-paying stocks are strongly positioned to continue raising payouts and to deliver solid total returns. Their strong balance sheets and steady revenue streams also provide an important investment characteristic that can be valuable in most markets.
The views and opinions are subject to change without notice and represents an assessment of the market environment at a specific point in time, should not be relied upon as legal, investment or tax advice and is not intended to predict or depict performance of any investment. We consider the information to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of suitability for investment. Investors should consult their own advisors with respect to their individual circumstances.There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that a market forecast made in this commentary will be realized.
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Risks of investing in Large Cap Value securities
The value of common stocks and other equity securities will fluctuate in response to developments concerning the company, political and regulatory circumstances, the stock market and the economy. In the short term, stock prices can fluctuate dramatically in response to these developments. Different parts of the market and different types of equity securities can react differently to these developments. These developments can affect a single company, all companies within the same industry, economic sector or geographic region, or the stock market as a whole. Dividend-paying stocks may be particularly sensitive to changes in market interest rates, and prices may decline as rates rise. Special risks of investing in foreign securities include (i) currency fluctuations, (ii) lower liquidity, (iii) political and economic uncertainties, and (iv) differences in accounting standards. Some international securities may represent small- and medium-sized companies, which may be more susceptible to price volatility and less liquid than larger companies.