The War On Dividend Stocks

The S&P 500 is off to a fine start this year. While the economic and fundamental reasons for that are up for debate, what is clear to me is that when you break down the S&P 500 Index, it is easy to see what market segments have contributed and which have not. One market slice that stands out like a sore thumb is dividend stocks. I am not talking about stocks that just pay a dividend. I mean those that yield enough for a retired person to live on. For many people in today’s environment, that is at least 3.50%.

The takeaway for dividend investors through the first one-third of 2017 is that most or all of their return is coming from that dividend yield and not from stock price appreciation. While 2016 was an outstanding one for higher-yield stocks, the current year has been a dud, at least so far. However, that is no reason to change gears and chase the market’s current momentum-stock groove. CNBC reported recently that 50% of the Nasdaq 100 Index weighting is comprised of only 5 stocks. That is the type of index skewing that in the past has caused investors to abandon their long-term objectives to chase “what is working now.” But if past is prologue, many investors and even their financial advisors will step into the market’s trap.

Source: Forbes

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