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	5%
Dividend Growth	5%
No Dividend	18%
Vendor’s Grade	14%
S&P500 w dividend	9%

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.


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

Result

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	10%	-1%
Dividend Growth	9%	-12%
No Dividend	16%	62%
All stocks	10%	N/A

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