Equity investors are bombarded with a multitude of statistics on a daily basis mostly showing past data. However the past does not predict the future and for the most part past performance does not mean predict the future performance of a stock. With the US Presidential election coming up, one of the many stats that often appear in the media include how well the stock market does during the rule of various presidents. People tend to infer answers to questions such as: Are Republican Presidents really good for stock market returns? or Do stocks perform better under Democrats? An article by Ken Fisher of Fisher Investments discussed this topic. From the article:

You may have heard some people claim there’s a reliable, gameable stock market pattern in US presidential terms – that some years are better than others.

You may also have heard that since 1926, every single year ending in five (1935 1945, 1955, etc) has been positive. Every one! But, you’ve also likely been warned these are silly indicators – as good as voodoo.

The ‘year five’ quirk is just that – a statistical quirk. There have been eight occurrences out of 10 since 1926. Since stocks rise more than fall, you’d normally expect at least two-thirds of those to be positive anyway.

It’s not unreasonable to expect that, with a coin weighted to show heads two-thirds of the time, all eight tosses would be heads. It happens. But it’s still just a quirk.

The following chart shows the Presidential Terms and the Annual S&P 500 Returns since 1926:

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Source: Presidential term cycles are stock market voodoo: Fisher’s financial mythbusters, Aug 15, 2016, Money Observer

The entire article is worth a read.

Dividend paying/growing stocks generally outperform non-dividend paying stocks. When dividends are reinvested the compounding effect gives a boost to the overall total return of an equity investment. This effect becomes especially strong over long time periods for obvious reasons. Stocks that not only pay dividends but also grow their dividends consistently year after year tend to yield the highest total return relative to just dividend payers and non-payers.

The following chart shows the dramatic difference in returns between Dividend Payers/Growers  vs.“the Market”:

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Source: Investing for Dividend Growth, Touchstone Investments

From the research report:

As companies become more profitable, they may share more by increasing their dividends. The chart below illustrates a hypothetical
example of dividend payers or growers based on a simulation of the S&P 500 Index. This select group of dividend payers and growers
has outpaced the hypothetical $1,000 investment in the S&P 500 Index on a total return basis by more than a two-to-one margin over
the past 24 years. In fact, the compounded growth of reinvested dividends of this hypothetical model of the Index has exceeded the total
return of the S&P 500 Index (and far outperformed the growth of reinvested S&P 500 Index dividends).

Related ETFs:

• iShares Dow Jones Select Dividend ETF (DVY)
• SPDR S&P Dividend ETF (SDY)
• Vanguard Dividend Appreciation ETF (VIG)
• Vanguard High Dividend Yield ETF (VYM)

Disclosure: No Positions