When it comes to stock investing, conventional thinking dictates that returns are all about capital appreciation. However, for many investors, price appreciation may not be the main driver of total return at all. In fact, dividends can constitute a larger portion of total returns than many people may realize.
According to Loomis Sayles, almost 50% of the S&P 500’s total return has come from dividends (when reinvested) since 1929. Blackrock estimates that up to 90% of the S&P 500’s total return over the past century can be attributed to the combination of dividends (reinvested) and dividend growth. Whether it’s 50% or 90%, the point is that stock returns may really be all about dividends.
Dividends are easy to overlook in the wake of a 150% stock market rally. However, market prices aren’t persistent, and during a correction, dividends may be the only positive return around. In addition, high-quality companies with stable, generous dividend yields tend to hold up better in difficult times. With that in mind, here are a few names to look at.
Have Your Cake With Intel
Intel Corporation (NASDAQ:INTC) is a $113 billion technology company based in the US, making microprocessors for the computing industry. Over the years, you’ve probably seen their “Intel Inside” or “Inspired by Intel” logos on a wide range of personal computers and laptops.
Financially, Intel Corporation (NASDAQ:INTC) looks strong. As of its most recent balance sheet, it had about $15.8 billion in total debt against $34.5 billion in current assets, $12 billion of which was cash. In addition, Intel Corporation (NASDAQ:INTC) has posted 10 straight years of positive earnings and cash flow.
Over the past decade, the company has generated average annual earnings growth of 16.5%, and delivered double-digit ROE every year. All this makes Intel Corporation (NASDAQ:INTC) look like a tech-growth-stock poster child — not the type of company known for dividends. Yet Intel Corporation (NASDAQ:INTC) currently yields 3.90%. That’s like having your growth cake and eating the dividends, too.
Chevron While You Wait
Chevron Corporation (NYSE:CVX) is a $250 billion integrated oil and gas company based in the US. It’s engaged in everything from exploration and mining of oil to refining and marketing of petroleum products.
While big oil is often associated with companies that are old, mature, and boring, Chevron Corporation (NYSE:CVX)’s actually been quite an exciting story. For example, it’s delivered an average annual earnings growth rate of 38% over the past decade. Over the same period, it’s stock price is up over 250%. Meanwhile, the S&P 500 has only returned 22%.
Financially, Chevron Corporation (NYSE:CVX) looks strong as well. Based on it’s most recent balance sheet, the company has $5 billion in debt against $23 billion in current assets, $9 billion of which is cash. Earnings and cash flow have been positive for 10 years in a row and, the ROE has been double digits year year.
Sure, alternative energy poses an obvious long-term threat to the oil industry. That being said, I wouldn’t hold my breath waiting for wind farms to take over big oil anytime soon. If you must, then consider holding onto Chevron Corporation (NYSE:CVX) while you wait. At least it’ll pay you 3.10% in annual dividends for your time.