The Dividend Key

As a dividend growth investor, I am not necessarily after the highest yields. I tend to look for dividend growth as opposed to just yield. That being said, high dividend stock investing has proven to be a positive strategy. Jeremy Siegel, who is famous for his book, The Future for Investors, studied the S&P 500 from 1957 to 2002 by breaking stocks into 3 groups: highest dividend stocks, lowest dividend stocks, and the entire S&P 500. His results are presented in the chart below:

Future for InvestorsClick to Enlarge

The cool thing is that the highest dividend yield stocks provided the highest returns with lower risk than the lowest yielding stocks. The other interesting thing is the lowest yielding stocks did worse than the S&P 500.

I think this one is important to implement as an index product or with a large basket of stocks. The risk can be higher with individual high yield stocks due to specific-company risk. However, as a whole group the high dividend stocks obviously has provided good returns with limited risk over the years.

Source: Tweedy Browne Company LLC (link opens a .pdf document)

(Photo Credit: daniel wildman)

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January 3, 2008, 4:31 pm

Very interesting. The reduced risk for these high dividend yield stocks. I wonder if the reason the low yield stocks did worse was because the price was high causing a low yield? Also, I wonder what the outcome would be if they took companies with the highest dividend growth and lowest dividend growth.

I was poking around over at Vanguard today and I noticed they have a Vanguard High Dividend Yield Index Fund.

January 3, 2008, 5:27 pm

Seigel is a partner at Wisdom Tree Investments. Their indexes draw on dividend theories and some of Seigel’s own theories. They have a quite a few indexes.

I haven’t invested in any of their ETF’s, but I have read Seigel’s book and the ETFs’ prospectuses. Pretty interesting stuff.

January 4, 2008, 9:18 am

Thanks Jason for that – I did know he was part of it but never really looked into the information on the site. I will do so.

The Dividend Guy

January 16, 2008, 8:41 am

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November 4, 2012, 1:51 pm

Do you or a colleague have a good list of “Privately” held companies that are high dividend yield? Would you please send me the list?

November 16, 2012, 3:42 pm

Hello Larry, we don’t keep a private list of stocks.


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