Comparing the Returns of MSCI Europe Price Index and Total Return Index: Chart

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Dividends account for a substantial portion of the long-term total returns. This is especially true in countries or regions where the dividend culture exists. For instance, the S&P 500 dividend yield is currently just 1.55%. Most European countries on the other hand have dividend yields of 3% or more. The FTSE 100 for example has a dividend yield of 3.69%. Higher dividend yields means larger total returns when many years or even decades are considered due to the effect of compounding.

According to a research report by Yoichiro Kai at T.Rowe Price, dividends accounted for 46% of the total returns in Europe from 1999 to Jan, 2023 as shown in the chart below:

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Past performance is not a reliable indicator of future performance.
As of January 27, 2023.
Source: T. Rowe Price analysis using data from Bloomberg Finance L.P. (see Additional Disclosures).

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

The key takeaway is that dividends are important and investors should not focus on just growth-oriented stocks for price appreciation to earn higher long-term total returns.

Total Returns for S&P 500 Dividend Aristocrats Index vs. S&P 500 Index : Chart

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Over the long term dividends constitute a significant portion of the total returns of any dividend paying stock or investment. Due to the effects of compounding returns tend to multiple many times over the years even if the start point of the dividend yield is low. For instance, the current dividend yield on the S&P 500 is 1.62%. However over many years or decades the total return of the S&P 500 index would be higher than the price returns as reinvested dividends grow many times over.

Another way to earn higher total returns is by investing in companies that increase dividends consistently over time. This strategy easily beat the total returns on the S&P 500 index. According to an article by Yoichiro Kai at T.RowePrice the difference in returns between firms that increased dividends and the S&P 500 is substantial.

From the piece:

That importance is even clearer with sustained dividend growth. 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.

(Fig. 4) Indexed total returns for S&P 500 Dividend Aristocrats Index and S&P 500 Index:

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Source: Tapping the Power of Global Equity Dividends by Yoichiro Kai at T.RowePrice

Related ETF:

  • SPDR S&P 500 ETF (SPY)
  • Vanguard S&P 500 ETF (VOO)

Disclosure: No positions

The World’s Top 10 Best-Selling Passenger Cars in 2022

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The Global Automotive Market Research Company JATO recently published a report on the top best-selling 10 cars in 2022. According to this report, two models of Tesla are in the list. Japanese auto giant Toyota (TM) was the top selling auto maker accounting for 13 out of 100 light vehicles sold worldwide. The world’s top seller was Toyota RAV4 followed by the Corolla model. Tesla’s Model Y came in at number three and Model 3 at number 10. Apart from Toyota and Tesla(TSLA), the other auto makers with winners in the ranking include Honda(HMC), Nissan(NSANY) and Ford(F).

The World’s Top 10 Best-Selling Passenger Cars in 2022:

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Source: Tesla places two models in the world top 10 best-selling vehicles in 2022

It is astonishing that EV maker Tesla’s models are in the world’s top selling passenger cars.

Disclosure: No positions

The Worlds Biggest Dividend Payers 2022

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Janus Henderson Investors recently released their 38th edition of the Janus Henderson Global Dividend Index report. The report is based on a study of the dividends of the 1,200 largest firms in the world by market capitalization. Overall 2022 was a great year for dividend investors as most of these firms raised their dividend payouts. The top dividend payer in 2022 was BHP Group Ltd (BHP) followed by Petrobras (PBR) of Brazil, Microsoft (MSFT), Exxon Mobil(XOM) and Apple (AAPL) of the US. The world’s biggest 20 dividend paying companies are shown in the table below:

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Source: Janus Henderson Global Dividend Index

Energy companies dominate this list as oil prices soared last year and profits gushed at these firms.

The full report at the above link is a worth a read.

Disclosure: Long PBR