Friday, February 19, 2016

Are dividend stocks better?

There are constant arguments for and against dividend stocks. I have defined simple tests and conclude that dividend stocks and dividend growth stocks are worse than S&P 500 stocks. Again, these are simple tests. If I have more time, I would have a test for every year (even better with every month). Here are my parameters:

·         Select the top 30 stocks for each test.

·         Only 3 tests from the following date: 1/5/05, 1/5/10, 1/5/15. Why do not start with the first of the month? It is because of the holiday and the potential weekend. If I have time, I should have included all years from 1/5/2000 and even better with all months.

·         The last five years represent the current market better than older dates.

·         The ending date for each test is one year later (sometimes a few days off due to holidays and weekends).

·         The stocks are from the S&P500 index. I do not know my historical database is smart enough to reflect the current selection of stocks at these dates.

·         By rough estimates, I add 2% dividend yield to the performance of S&P500 index, 5% to dividend stocks and 4% to dividend growth stocks. Testing other strategies, dividends are not as important as these tests.

·         Dividend growth stocks have top dividend yields with dividend growth equal or great than 10%.

·         Non-dividend stocks are stocks without dividends sorted by the stock symbol in ascending order.

The following table is a summary of my finding with the averages of three tests. The last entry is sorted by the grade from the vendor. It is included here for my reference.

One-Year Return
Dividend Growth
No Dividend
Vendor’s Grade
S&P500 w dividend

The above tests can be reproduced with a historical database. Let me know if I were wrong. I am surprised on the poor performances of the Dividend and Dividend Growth stocks. Survivor bias is minimal for large companies.

Update. The test has been improved with larger no. of tests.


The tests can be reproduced almost identically from a historical database. It is no cherry picking and I have no bias towards any of the test strategies. The result is for educational purpose only. I am not responsible for any error.

Avg. One-Year Return
Beat All by
Dividend Growth
No Dividend
All stocks


For more of my reasoning and complete description, order the book described next. It has all the details in deriving the results.

It has 800 pages (6*9) for $9.99. It could be the best $10 you ever spend.

The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.

I challenged to have the best-performed article in Seeking Alpha history, an investing site, for recommending 5 or more stocks in one year after the publish date. The concepts for that article are discussed in this book.  

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