Posts Tagged ‘high dividend’
This is the complete list of US dividend oriented ETFs.
| Symbol | Asset (mm) | Expense | Yield* | Name |
| DVY | 4782 | 0.40% | 4.67% | iShares DJ Select Dividend |
| VIG | 402 | 0.28% | 2.20% | Dividend Achievers Select |
| PFF | 308 | 0.48% | 11.21% | iShares S&P US Preferred Stock |
| DLN | 288 | 0.28% | 3.61% | WisdomTree LargeCap Dividend |
| SDY | 230 | 0.35% | 4.40% | SPDR S&P High Yield Dividend Aristocrats |
| DTN | 145 | 0.38% | 4.82% | WisdomTree Dividend 100 |
| PEY | 139 | 0.60% | 5.69% | Mergent Dividend Achievers 50 |
| FVD | 137 | 0.70% | 3.20% | First Trust Value Line Dividend |
| VYM | 120 | 0.25% | 3.72% | FTSE High Dividend Yield |
| DHS | 120 | 0.38% | 5.50% | WisdomTree High-Yielding Equity |
| DES | 80 | 0.38% | 4.73% | WisdomTree SmallCap Dividend |
| DTD | 80 | 0.28% | 3.71% | WisdomTree Dividend |
| DON | 78 | 0.38% | 4.31% | WisdomTree MidCap Dividend |
| PFM | 53 | 0.60% | 2.72% | PowerShares Dividend Achievers |
| CVY | 50 | 0.60% | 7.61% | Claymore Yield Hog |
| FDL | 45 | 0.45% | 5.52% | First Trust Morning Star Dividend |
| PHJ | 23 | 0.61% | 2.70% | PowerShares High Grow Rate Dividend Achievers |
| LVL | 7 | 0.60% | 11.21% | Claymore High Income |
* Yield information is according to Yahoo Finance as on 9/30/08.
The high-dividend-yield ETFs could come to the rescue of your retirement if we have a prolonged recession.
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“This sucker could go down!”
That was what President Bush said during the recent $700 billion bailout plan meeting with congressional leaders at the White House. The market has gone down another 20% and talk of another Great Depression has filled the airwaves ever since.
If you are a listener of Jim Cramer, you would have heard his advice: Sell, sell, sell! He constantly reminds his listeners how the Dow went down 83% during the Great Depression; and never fully recovered until 1954.
Cramer forgot to account for dividends. If dividends from the Dow stocks were reinvested, then investors would have been able to recoup all losses by 1945. That’s a full nine years sooner! Think about this: what if investors held only high-dividend stocks? Would they have recovered their investments even sooner?
To find out, I examined the following four portfolios’ performance from 1929 onwards:
- Portfolio A: stocks with zero dividends.
- Portfolio B: stocks with bottom 30% dividend yields.
- Portfolio C: stocks with middle 40% dividend yields.
- Portfolio D: stocks with top 30% dividend yields.
All four portfolios peaked in August, 1929. With the exception of portfolio B, all portfolios bottomed in May, 1933. Portfolio B bottomed in June, 1933. For each of the four portfolios, the total peak-to-trough decline (drawdown) and the number months it took to recover are presented here:
| Buy at the top and hold during Great Depression | ||||
| A | B | C | D | |
| Drawdown | 89% | 86% | 85.4% | 84% |
| Months to recover | 132 | 154 | 144 | 44 |
Data source: Kenneth French Data Library
It is probably not surprising that the highest dividend-yielding portfolio D fell a little less than other portfolios. It’s striking that portfolio D recouped all losses in just three-and-a-half years – eight to nine years before other portfolios.
Why did high dividend-yield stocks performed so well?
During the Great Depression, stock prices on average fell more than 80%. Dividends fell only about 11%. (See Chart below) As Yale University professor Robert Shiller has found, historically dividend volatility was about 15% of price volatility (meaning dividend declines were a fraction of price declines in recessions.) Stable dividend payments quickly made up for losses in price.
If the price gyration makes you dizzy, focus on dividends instead. They don’t gyrate and ultimately, they will sustain your retirement.
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