Why Dividend Growers Are More Important To Total Returns Than Dividend Payers

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Dividends are an important part of total returns when investing in equities. Dividends account for large differences in returns between price returns and total returns. In addition to that, dividend growers are more important for the growth in total returns. The following chart shows the stark differences in return between the S&P 500 Total Return Index vs. S&P 500 Dividend Aristocrats Index:

Click to enlarge

Source: Tapping the Power of Global Equity Dividends by Yoichiro Kai, T.Rowe Price

An excerpt from the above piece:

As an example, the S&P 500 Dividend Aristocrats Index, which represents over 60 S&P 500 companies with 25 consecutive years of dividend increases, has outperformed the S&P 500 Index by more than 75% since 1989 (Figure 4). By identifying companies with the ability to sustain and grow dividends and taking an active, global approach, we believe we have the potential to drive consistent long‑term returns.

So the key takeaway is that dividends can have a substantial impact on total returns especially over the long run. Hence even small dividend yields matter when picking dividend paying stocks. The above chart vividly shows that companies that grow their dividends consistently will generate much higher returns than the ones that just pay dividends.

Related ETFs:

  • SPDR S&P 500 ETF (SPY)
  • iShares Core S&P 500 ETF (IVV)
  • Vanguard S&P 500 ETF (VOO)
  • SPDR Portfolio S&P 500 ETF (SPLG)
  • iShares Select Dividend ETF (DVY)

Disclosure No positions

A Look at Europe’s Top Two Most Valuable Companies

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The most valuable company in Europe based on market capitalization is the French luxury giant LVMH Moet Hennessy Louis Vuitton SE (LVMUY). Based in the ADR trading on the OTC market, the market cap was $482.5 billion as of yesterday. Below is a short profile of the firm:

LVMH Moet Hennessy Louis Vuitton SE is a France-based luxury group active in six sectors: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, Selective Retailing and Other Activities. Wines and Spirits owns brands, such as Moet & Chandon, Krug, Veuve Clicquot, Hennessy and Chteau d’Yquem, among others. Fashion and Leather Goods owns brands, such as Luis Vuitton, Christian Dior and Givenchy, among others. Perfumes and Cosmetics owns brands, such as Parfums Christian Dior, Parfums Givenchy Guerlain, Benefit Cosmetics, Fresh and Make Up For Ever, among others. Watches and Jewelry owns brands, including TAG Heuer, Hublo, Zenith, Bulgari, Chaumet and Fred, among others. Selective Retailing owns the brands DFS, Miami Cruiseline, Sephora and Le Bon Marche Rive Gauche, among others. Other Activities includes its acquisition of Pedemonte Group, a jewelry producer and the arts brands, such as Les Echos, Royal Van Lent, and Cheval Blanc

The stock is up 30% year-to-date. Over the past 5 years it has more than doubled as shown in the chart below:

Source: Google Finance

The second most valuable firm based on market cap is Danish drug giant Novo Nordisk A/S (NVO). It is a world leader in the treatment for diabetes (Ozempic). This drug is currently prescribe for treating obesity also. NVO stock has soared recently due to the extreme popularity of its obesity drug Wegovy.

The company has a market cap of $286.0 billion based on the ADR trading in the US market. Year-to-date the stock is up 23%. The 5-year return is an astonishing 243% as shown in the chart below:

Source: Google Finance

Disclosure: No positions

Germany’s Top 10 Trading Partners in 2022: Chart

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The top export destination for Germany is the US based on preliminary 2022 data according to Destatis. The next export country was France followed by the Netherlands. China used to the second top export market Germany in 2020. But the pandemic and other factors have changed that.

China is the top country for imports into Germany. Only the US and China are among the non-European countries that are the major trade partners of Germany.

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Source: Destatis