Blogs & Comment

Dividend-growth stocks outperform

I was digging around for information on companies that regularly raise their dividends and came across a document published by Mergent Inc. It has a rather impressive table showing how dividend-growth stocks have outperformed the S&P 500 Index over 1-, 3-, 5-, 10-, 15- and 20-year periods with less volatility.
The table below contains numbers for the 15- and 20-year periods (ending 2008). As can be seen, the dividend-growth approach beats the S&P 500 by about 1.5 percentage points a year in both periods. The one qualm is uncertainty over Mergents choice of S&P 500 Index. It would be appropriate to do the comparison with the total return S&P 500 yet I could not find in the document an explicit reference to using that version.
Regardless, a9.73% average annual return in dividend growth stocks over 20 years is laudable in itself. So is the 8% average annual return over the past 15 years. And with dividend yields currently still elevated relative to historical norms in the aftermath of the financial crisis of 2008, the return from owning dividend-growth stocks over the next 15 to 20 years could potentially be even better than what is shown below.

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