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:
Callan has published their famousThe 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.
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:
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.
