Lower, Growing Dividend Yield is Better Than Just Higher Dividend Yield

Stocks that have low dividend yields but grow the yield consistently each year perform better in the long run than stocks with high dividend yields as discussed in this article. Total return of lower dividend stocks in the long run will be higher than the total return of higher dividend stocks.For example, the telecom sector pays a higher dividend than consumer staples sector. However in terms of returns consumer staples sector stocks easily beat telecom sector stocks.

In this post, let me explain this logic using the examples of three ETFs for three S&P sectors. Please note that the charts below show only price returns. If dividends are included the difference would be much here.

a) Consumer Staples Select Sector SPDR ETF (XLP)  vs.SPDR S&P Telecom ETF (XTL) – 2 Years:

Click to enlarge



b) Consumer Staples Select Sector SPDR ETF (XLP)  vs Utilities Select Sector SPDR ETF (XLU) – Long Term:


Related ETFs:

Utilities Select Sector SPDR (XLU)
SPDR S&P Telecom (XTL)
Consumer Staples Select Sector SPDR (XLP)

Disclosure: No Positions

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