Yes, the answer is dividends. Almost always.
More and more evidence is showing that dividends are important, providing the bulk of equity investor returns for many generations. This doesn't mean it's always a good time to buy dividend stocks, but it's something to keep in mind.
More and more evidence is showing that dividends are important, providing the bulk of equity investor returns for many generations. This doesn't mean it's always a good time to buy dividend stocks, but it's something to keep in mind.
The evidence that dividends are hugely important just聽continues to pile up. By saying this, I don't mean that it is always a good time to buy dividend stocks - right now, for example, the utility sector looks particularly stupid trading at a premium multiple to the market...but I digress.
Ben Inker of GMO took on Bill Gross's聽Death of the Cult of Equities聽spiel聽in a new white paper yesterday.聽 Essentially, he proves the point that GDP growth rates have little or nothing to do with stock market returns here or elsewhere in the world, effectively negating Gross's premise that some sort of mean reversion must take place.聽 And while that's all well and good, I think the more interesting portion of Inker's white paper dealt with enormous contribution of dividends for the total return of stocks over the decades.聽 Check this out:
At my shop, we've been emphasizing fundamentally-weighted indices based on dividends since way before it was fashionable.聽 And while, in the short-term,聽the trade has gotten a bit crowded, we'd love nothing more than the opportunity to buy weakness as fairweather investors run and chase the next shiny object that comes along in the near future.