On the back of yesterday’s Cyprus-inspired losses, stocks opened slightly higher this morning, with the S&P 500 (S&P Indices:.INX) and the narrower, price-weighted Dow Jones Industrial Average 2 Minute (Dow Jones Indices:.DJI) up 0.23% and 0.32%, respectively, at 10:15 a.m. EST.
Dividends pay off
Yesterday’s Cypriot flu roiled global markets with a bout of “risk on,” but at least one group was less volatile than the broad market: high-quality dividend shares. In fact, this group has been beating the market this year — in some cases (depending on how you select your dividend payers) by a wide margin.
The following chart shows the year-to-date performance of three dividend-focused ETFs — the First Trust Morningstar Dividend Leaders Index Fund, the SPDR S&P Dividend ETF (NYSEMKT:SDY), and the Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) — relative to that of the S&P 500:
All three ETFs are beating the market. Furthermore, it’s the stalwart dividend engines — those with the longest, most consistent track records of dividend increases — that have posted the greatest margin of outperformance. (Incidentally, the ranking of performance is the same over the past 12 months.)
Indeed, the SPDR S&P Dividend ETF tracks the S&P High Yield Dividend Aristocrats index, which contains companies drawn from the S&P 1500 that that have raised dividends annually over a minimum 20-year period — a remarkable achievement. Surprisingly, only two of the SPDR ETF’s top 10 holdings are Dow components: AT&T and Johnson & Johnson.
That ought to be a lesson to cash-heavy technology companies — most prominent among them Apple Inc. (NASDAQ:AAPL). While it will be long time before the maker of the iPad can be considered for inclusion in the Dividend Aristocrats Index (Apple Inc. (NASDAQ:AAPL) declared its first dividend in 16 years in 2012), a healthy increase in its dividend could endear it to shareholders both old and new and help reverse the negative sentiment that has brutalized the shares since last September. At 2.4%, Apple Inc. (NASDAQ:AAPL)‘s dividend yield is already above that of the S&P 500, but it can do better yet, which would give it more price-appreciation potential for it to square the two yields.
The article The Dividend Aristocrats’ Etiquette Lesson for Apple originally appeared on Fool.com and is written by Alex Dumortier, CFA.
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