High Dividends, Low Returns

If ever there has been a time to own companies that pay above-market dividends, this would seem to be one of the better ones. The dividend yield of the S&P 500 (SPDR S&P 500 Trust ETF: SPY), while relatively low in the absolute sense, stands out against intermediate generational-low Treasury and Corporate yields. At 2.1%, the yield is 30 bps above the median over the past two decades and almost double the 1.1% low as we entered this century. Not surprisingly, many investors—starved for income on their investable assets—have been transitioning out of fixed-income into alternatives, such as dividend-paying stocks.

So far this year, SPHYA has returned 5.72%, which includes over 2% from dividends. The Dividend Aristocrats, though, has returned 9.57%, just below the S&P 500's 9.65% return through 7/20. Pursuing a relatively high-quality dividend strategy (as the companies in SDY can only be described this way) has been inferior to both a dividend-neutral Large-Cap strategy (S&P 500) as well as the plain Aristocrat strategy.

Source: Seeking Alpha

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