• Entertainment
  • Finance
  • Marketing
  • Real Estate
  • Technology
  • Social
National Journal Community Of e-Experts
Finance

High-Dividend Stocks: A Lonely Opportunity?

By Kurt Osterberg · On April 20, 2018

There is a market “truism” that needs to be set straight. In summary:

“Rising interest rates hinder high dividend equities.”

We’d rephrase it this way:

“Rising rates have been hindering high-dividend equities in the last couple of years, but over any sizable time frame, the causal relationship between rates and equity factors has been cursory at best.”

With that, see figure 1. It shows the S&P 500 Growth Index relative to the WisdomTree U.S. High Dividend Index since the birth of the WisdomTree U.S. High Dividend Fund (DHS) in 2006, along with 10-Year Treasury yields. Growth was outperforming big dividend payers in the years immediately preceding the global financial crisis, and it kept leading during the crisis. Throughout the middle of the decade, bond yields gyrated back and forth, ultimately halving. Yet high-dividend payers struggled, defying today’s popular notion that interest rate directionality is the determining factor of dividend stocks’ relative performance.

Growth stocks’ leadership run ended on March 11, 2009, just days after the stock market bottomed, and high-dividend payers began to outperform in the early years of the economic recovery. Despite improving business conditions, bond yields kept falling until 2012. Those three years were among the few that do appear to confirm the popular “truism.”

Figure 1: Interest Rates Are Not Always the Arbiter of Performance

WTHYE Dividend Perfomance -05-18

Then, growth stocks reached their relative bottom on April 19, 2013. Treasury yields were 1.71%. While growth stocks outperformed for years from that point, interest rates yawned, chopping around and ultimately falling to 1.36% on July 8, 2016. Yet the thesis that falling rates help yield-oriented stocks was debunked during that more than a three-year spell. From April 19, 2013, to July 8, 2016—when rates were falling by 35 basis points (bps) to that generational low—the S&P 500 Growth Index posted a total return of 53.56% while the WisdomTree U.S. High Dividend Index rose “just” 45.12%, a gap of 844 bps (199 bps annualized).

Print Friendly, PDF & Email

Share Tweet

Kurt Osterberg

You Might Also Like

  • Finance

    How To Earn A 10% Yield On Cost From PepsiCo Dividends

  • Finance

    Extreme Cold Weather Forecast Puts Natural Gas ETFs In Focus

  • Finance

    How To Trade Options

Top Finance

  • Dollar General (DG) Q2 Earnings And Revenues Surpass Estimates Dollar General (DG) Q2 Earnings And Revenues Surpass Estimates
  • Samsung Galaxy Note 9 Review Samsung Galaxy Note 9 Review
  • USD/CAD Forecast October 22-26 – Will The Canadian Dollar Rise On The Rate Hike USD/CAD Forecast October 22-26 – Will The Canadian Dollar Rise On The Rate Hike
  • Extreme Cold Weather Forecast Puts Natural Gas ETFs In Focus Extreme Cold Weather Forecast Puts Natural Gas ETFs In Focus
  • Adding To Merkel's Woes: SPD's Collapse In Germany, Greens The New Left Darlings Adding To Merkel’s Woes: SPD’s Collapse In Germany, Greens The New Left Darlings

New Posts

  • How To Earn A 10% Yield On Cost From PepsiCo Dividends

    How To Earn A 10% Yield On Cost From PepsiCo Dividends

    October 21, 2018
  • Extreme Cold Weather Forecast Puts Natural Gas ETFs In Focus

    Extreme Cold Weather Forecast Puts Natural Gas ETFs In Focus

    October 21, 2018
  • How To Trade Options

    How To Trade Options

    October 21, 2018
  • Adding To Merkel’s Woes: SPD’s Collapse In Germany, Greens The New Left Darlings

    Adding To Merkel’s Woes: SPD’s Collapse In Germany, Greens The New Left Darlings

    October 20, 2018
  • Self Sufficiency Over Adversity

    Self Sufficiency Over Adversity

    October 20, 2018
  • About
  • Contact Us
  • Privacy & Policy
  • Sitemap
  • Terms of use

Copyright © 2018 NJCEE. All Rights Reserved.