High-Yielding Commodities For 2012

At first glance, it can be easy to overlook dividend yields when making investment decisions. For example, seeing a 2% yield on a stock may seem minuscule, but consider this; a portfolio with a baseline investment of $100,000, earning an average 2% annually off of dividends will appreciate to approximately $122,000 in 10 years, and nearly $150,000 in 20 years, assuming the gains are re-invested and no appreciation in stock price. In fact, a recent study conducted by Standard & Poor’s revealed that dividend components were responsible for 44% of the total return in the last 80 years of the S&P 500′s history. From 1950 until 2010, an investment of one dollar with dividends and reinvestment would have performed eight times better than a dollar invested in a non-dividend security; that dividend invested dollar would be worth roughly $500 today.

Dividends can also be used as a partial hedge in bear markets. For instance, the last 10 year have been coined “The Lost Decade” for the U.S. stocks, as equities finished lower at the end of 2009 than they began in 2000. The S&P 500 returned -2.7% in the 2000′s, the worst decade in over 50 years. But, the average dividend distribution for the 2000′s was 1.8%, cutting losses from -2.7% to just -0.9%. And in decades where average stock prices rose (which is every decade from 1950 until 2000), gains are only furthered by strong dividends. Simply put, dividends provide stability even when markets stumble.

Source: ETF Daily News

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