The multiple benefits of dividends

Typically, mature, profitable companies reward their investors by paying dividends.

Is your portfolio positioned to benefit from dividend-paying stocks?

Dividends may help investors:

Mitigate market declines. Dividend-paying stocks could amplify equity returns if an economic recovery gains momentum. If conditions falter, the income that dividends generate may help offset the impact of a market decline.

Focus on quality companies. Companies that pay consistent dividends typically focus on long-term results and sustainable earnings, seeking to generate stable income streams along the way.

Increase portfolio returns. Without the additional returns provided by reinvested dividends, portfolio performance can be notably weaker.

As the chart below indicates, dividend payouts have accounted for an important part of the S&P 500® Index’s total return, as represented by the S&P Dividend Aristocrats Index, for the 10-year period ended 2011.

Dividends effect on stock market return

Source: Morningstar, April 2012, most recent data available.


Your financial advisor can help you decide if a dividend-paying allocation is appropriate for your portfolio in light of your goals, time horizon, and attitude toward risk.



Investing involves risk, including the possible loss of principal.

The S&P 500 Dividend® Aristocrats Index measures the performance of large cap, blue chip companies with the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.

