Boy I remember back in the bad old days of the late 1990's, when dividend-paying stock-owners were looked down upon, by their Nasdaq-investing friends. Their stocks seemingly soared, while boring old dividend-paying stocks just kind of coasted along. Time has shown of course, that many Nasdaq-type stocks were destined to crash and burn, while the dividenders did nothing more than produce reliable consistent wealth growth.
A recent study by RBC Dominion Securities show how dramatic that difference has been. They isolated stocks into three silos, one which was stocks that paid no dividends over the past ten years, another consisting of stocks with stable dividends, and the last consisting of stocks that consistently increased their dividend over the period.
In the US market, to May 30, the average annual rate of return was as follows:
- No dividends: 6.5% annually
- Stable dividends: 8.8% annually
- Increasing dividends: 9.6% annually.
In Canada, the difference was even starker, and more remarkable:
- No dividends: 1.3% annually
- Stable dividends: 15.5% annually
- Increasing dividends: 17.2% annually
Just to remind you of exactly what kind of return 17.2% is - that'll double your wealth in just over four years. Please bore me some more!
The Confused Capitalist