Two Charts on Dividend Contribution to S&P 500 Total Return

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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.

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)
  4. SPDR Portfolio S&P 500 ETF (SPLG)

Disclosure: No positions

Significant Intra-Year Declines in S&P 500 Are Normal: Charts

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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

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)
  4. SPDR Portfolio S&P 500 ETF (SPLG)

The Complete List of Constituents of the S&P 500 Index can be found here.

Disclosure: No positions

Dividend Withholding Tax Rates by Country for 2023

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The Dividend Withholding Tax Rates by Country sheet for 2023 has been published by S&P Global. Investors in foreign stocks can refer to this chart for finding if any withholding taxes applicable to dividends. Brazil does not withhold taxes on dividends paid out to foreign investors. Similarly other countries such as Hungary, Hong Kong, Singapore, etc. also do not withhold taxes.

Note on Chile’s Dividend Withholding Tax Rate:

Among emerging markets Chile used to charge 35%. But reduced it to 23.9041123% last year. So the 35% shown in the below table is incorrect.

Though the rate for Canada is noted as 25% in this table, this can be reduced to 15% in non-retirement accounts by submitting NR-301 form to Canada Revenue Agency (CRA). For stocks (excluding REITs) held in qualified retirement accounts such as IRAs, Canada does not withhold any dividends for US residents. So Canadian income equities are ideal for US retirement accounts.

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Source: S&P Global