DIVIDEND STOCK ARISTOCRATS: Pros and Cons

Posted on June 2, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By AI

SPONSOR: http://www.CertifiedMedicalPlanner.org

***

***

SPONSOR: http://www.MarcinkoAssociates.com

According to wikipedia, the S&P 500 Dividend Aristocrats is a stock market index composed of the companies in the S&P 500 index that have increased their dividends in each of the past 25 consecutive years. It was launched in May 2005.

There are other indexes of dividend aristocrats that vary with respect to market cap and minimum duration of consecutive yearly dividend increases. Components are added when they reach the 25-year threshold and are removed when they fail to increase their dividend during a calendar year or are removed from the S&P 500. However, a study found that the stock performance of companies improves after they are removed from the index The index has been recommended as an alternative to bonds for investors looking to generate income.

To invest in the index, there are several exchange traded funds (ETFs), which seek to replicate the performance of the index.

STOCK DIVIDENDS: https://medicalexecutivepost.com/2025/03/02/stock-dividends-company-earnings-distribution/

***

And so, to clarify, the following are the advantages and disadvantages of US dividend aristocrats:

Advantages

  1. They certainly display consistent, blue-chirp corporations with an extended history of vital funds and dividend increments.
  2. Additionally, these stocks offer fixed revenue growth.
  3. In other words, they tend to possess lower price volatility.
  4. Please note that dividend investing supporters prefer a credible income source.
  5. They are sufficiently stable for continuous annual dividend increments across decades, certainly even through recessions.
  6. Above all, it helps quicker portfolio building through reinvestment in these stocks.
  7. They certainly ensure successful long-term investing.
  8. Regarded as among the most famous investment strategies, they relish extensive consumer confidence.

Disadvantages

  1. To clarify, they are considered taxable earnings.
  2. In other words, they offer a lack of control over their distribution timing.
  3. Above all, these shares have under performed S&P 500.
  4. Company development certainly consumes a lot of time.
  5. Additionally, they are subject to market fluctuations.
  6. Moreover, they are considered unimaginative.

STOCK: https://medicalexecutivepost.com/2024/08/20/preferred-versus-common-stock/

COMMENTS APPRECIATED

Like and Refer

***

***

Filed under: "Ask-an-Advisor", Alternative Investments, CMP Program, Financial Planning, Funding Basics, Glossary Terms, Investing, Marcinko Associates | Tagged: , , , , , , , , , , , , , , | Leave a comment »

STOCK DIVIDENDS: Company Earnings Distribution

Posted on March 2, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

BY DR. DAVID EDWARD MARCINKO; MBA MEd CMP™

***

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITION

If the definition of a security is title to a stream of cash flows, then the dividends a company is expected to pay to equity shareholders on a periodic basis (e.g., quarterly) are a clear source of return for an investor.  A dividend is simply a distribution of (some portion of) the company’s earnings to equity shareholders.  Like a bond yield, a stock’s dividend yield can be used to measure the income return on the stock. 

To determine a stock’s dividend yield, the trailing year’s dividends per share paid are divided by the current stock price.  However, a key difference between a dividend yield and a bond yield is the level of certainty that can be assumed regarding future payments, since a bond’s coupon is generally predetermined and its payment is expected to be senior to the payment of dividends.

After a company has determined that it has earned a profit, management has to decide what to do with those profits.  One choice is to distribute the earnings to shareholders in the form of dividends, while another option is to reinvest the profits in the company.  A company’s management may determine that the shareholders interest is best served by using the earnings to pursue growth opportunities (e.g., capital expansion, research & development, etc.) at the corporate level.  Thus, when management believes that its investment opportunities are likely to produce a higher return than what investors’ could generate with their dividends or that reinvestment is needed to maintain its financial strength, the company will retain the earnings. 

One of the biggest myths in investing is capital appreciation accounts for the largest part of investors’ gains. Dividends, or cash payments to shareholders, actually account for a substantial part of an equity investor’s total return. In fact since 1926, dividends have accounted for more than 40% of the total return of the S&P 500 stock index. In the last decade (2000-2009), the S&P 500’s total return of -9% would have been a heftier loss of -24% had it not been for the 15% contribution from dividends.

History has shown that dividends have been a powerful source of total return in a diversified investment portfolio, especially during periods of market turbulence. In examining the prior eight decades of stock market performance, dividends often account for more than 2/3 of the total return (1930s, 1940s, 1970s, & 2000s).  If an investor avoided dividend paying stocks during these elongated time periods, most of the total gains would be lost. 

***

DIVIDEND CONTRIBUTION OF S&P 500 RETURN BY DECADE   
 S&P 500 CumulativeDividendsAverage 
 Price %DividendTotal% of TotalPayout 
YearsChangeContribution*ReturnReturnRatio** 
       
1930s-41.9%56.0%14.1%>100%90.1% 
1940s34.8%100.3%135.0%74.3%59.4% 
1950s256.7%180.0%436.7%41.2%54.6% 
1960s53.7%54.2%107.9%50.2%56.0% 
1970s17.2%59.1%76.4%77.4%45.5% 
1980s227.4%143.1%370.5%38.6%48.6% 
1990s315.7%117.1%432.8%27.0%47.6% 
2000s-24.1%15.0%-9.1%>100%35.3% 
2010s27.9%8.4%36.3%23.1%28.4% 
as of 12/31/12      

Source: Strategas

During those decades such as the 2000s where the stock market struggled to advance, dividends were a significant element for investor survival.  This is not only due to the dividends alone, but also the risk element of stocks that pay dividends.  Dividend stocks have historically provided lower overall volatility and stronger downside protection when markets decline. Since 1927, dividend stocks have consistently held up better than the broader market during downturns. You can measure downside risk through a statistic known as downside capture ratio.

Downside capture ratio is a statistical measure of overall performance in a down stock market. An investment category, or investment manager, who has a down-market ratio less than 100 has outperformed the index during a falling stock market. 

For example, a down-market capture ratio of 80 indicates that the portfolio measure declined only 80% as much as the index during the period. The downside capture ratio of high-dividend-yielding stocks, since 1927, has been 81% or lower over various long-term periods.  Put a better way, during months that the S&P 500 stock index fell, dividend stocks declined by nearly 19% less than the broader market.

***

DOWNSIDE AND UPSIDE CAPTURE RATIOS OF HIGH DIVIDEND STOCKS – 1927 TO 2011  
The lower the number, the better    
                                                                            Downside 
                                                                              Capture Ratio 
   
Since 192781.53 
50-year67.45 
30-year65.86 
20-year65.83 
10-year81.61 
   

Source: Kenneth French as of 12/31/11

EDUCATION: Books

SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit a RFP for speaking engagements: CONTACT: MarcinkoAdvisors@outlook.com 

COMMENTS APPRECIATED

Refer, Subscribe and Like

***

***

Filed under: "Ask-an-Advisor", CMP Program, Financial Planning, Glossary Terms, iMBA, Inc., Investing, Marcinko Associates | Tagged: , , , , , , , , , , , , , , , | Leave a comment »

STOCK SPLITS: A Vital Equity Investing Concept for Physicians and all Investors

Posted on June 8, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko MBA MEd CMP™

SPONSOR: http://www.CertifiedMedicalPlanner.org

***

***
One important equity concept that medical professionals should be aware of is the idea of stock splits.

In a stock split, a corporation issues a set number of shares in exchange for each share held by share holders. Typically, a stock split increases the number of shares owned by a shareholder.

CITE: https://www.r2library.com/Resource

For example, XYZ Corp. may declare a 2-for-1 split, which means that share holders will receive two shares for each share that they own. However, corporations can also declare a reverse stock split, such as a 1-for-2 split where shareholders would receive 1 share for every two shares that they own.


While stock splits can either increase or decrease the number of shares that a share holder owns, the most important thing to understand about stock splits is that they have no impact on the aggregate value of the shareholder’s position in the company.

Using the XYZ Corp. example above, if the stock is trading at $10 per share, an investor owning 100 shares has a 24 total position of $1,000. After the 2-for-1 split occurs the investor will now own 200 shares, but the value of the stock will adjust downward from $10 per share to $5 per share.

Thus, the investor still owns $1,000 of XYZ stock. While stock splits are often interpreted as signals from management that conditions in the company are strong, there is no intrinsic reason that a stock split will result in subsequent stock appreciation.

NVIDIA Splits: https://tinyurl.com/238yze4k

***

COMMENTS APPRECIATED

Thank You

***

***

Filed under: "Ask-an-Advisor", "Doctors Only", Accounting, Glossary Terms, Health Economics, Healthcare Finance, Investing, Marcinko Associates, Touring with Marcinko | Tagged: , , , , , , , | Leave a comment »