The Dividend Withholding Tax rate for foreign investors in Chilean equities used to be 35%. This rate has been reduced to 23.9041123%. This is a welcome news for ADR holders.
Below is the YTD returns of Chilean ADRs trading on the US exchanges:
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Source: BNY Mellon
Last year Lithium miner Soc. Quimica y Minera de Chile (SQM) had an astonishing run. It remains to be seen if this year also will be great for SQM investors.
Disclosure: Long BCH
European stocks are performing better so far this year than US stocks. However over the past 5 years and the long run they they have lagged US markets. For instance, the DAX index is up 6.85% YTD while the S&P has increased by 3.88%. Over the past 5 years, the S&P 500 has shot up over 3 times that of the DAX as shown in the chart below:
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Source: Google Finance
Similarly the S&P has crushed the DAX in the long by an astonishing margin.
Source: Google Finance
No wonder most US investors prefer domestic equities than any overseas markets including Germany.
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Disclosure: No positions
Callan has published their famous The Periodic Table of Investment Returns 2022 edition. This chart shows the annual returns of key indices ranked in order of performance for each calendar year. Last year when most equities declined cash equivalent was the king with a return of 1.46%. REITs were the worst as rising interest rates and other factors crushed the sector. US large caps almost ended the year in bear market.
Click The Callan Periodic Table of Investment Returns 2004 To 2023: Chart for the latest chart.
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Source: Callan
You can download The Callan Periodic Table of Investment Return in pdf format at Callan’s site by clicking the above link.
The dividend yield on the S&P 500 is small relative to other developed markets. Currently the dividend yield is at 1.74%. For many years the rate has hovered around the 2% mark. Though the yield may seem insignificant over the years due to compounding the total return gets amplified due to dividends’ contribution. For example, from 1930 to 2021, 40% of the annualized total return on the S&P 500 was derived from dividends and their reinvestment and the remaining from capital appreciation according to an article at Nuveen:
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Source: Why dividend growth?, Nuveen
The following chart takes a different perspective and shows the S&P 500 composite total return decomposed by decade from 1900 to 2021:
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Source: Dividend Investing for Uncertain Markets: A Quality-First Approach, GQG Partners
A short excerpt from the above piece:
Over the last 121 years of the S&P 500 Index’s total nominal return of approximately 9.4 per cent, dividends (represented by the green bars) and earnings growth (represented by the blue bars) contributed roughly 4.0 per cent and 5.0 per cent, respectively. Changes in valuation (represented by the bronze bars) – or the speculative contribution to returns despite the attractive results over the most recent decade – have mostly been an unpredictable source of price volatility with a lackluster long-term contribution to total return.
Both the above linked articles are worth a read.
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Disclosure: No positions
The S&P 500 index declined by about 20% in 2022. Though the index is in the positive so far this year it remains to be seen if it will end the year with a decent return. With a recession on the horizon and interest rates expected to rise higher, volatility might still appear its ugly head. However it is important to remember that volatility in equity markets is normal. The S&P 500 index has had intra-year declines of double digit percentage points in many years and ended up the year with a positive return as the following chart shows:
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Source: 3 core lessons every investor needs to know by Daniel Prince, iShares
Below is another take on the S&P 500 intra-year drawdowns and calendar-year returns from 1980 to 2021:
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Source: Significant Intra-Year Drawdowns Are Common by Scott Becker, Calamos Investments
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The Complete List of Constituents of the S&P 500 Index can be found here.
Disclosure: No positions