Battling The Bear With Dividends As Stocks Slip Into Red For The Year

FILE – Nov. 20, 2018 – Stock screen displays at the New York Stock Exchange.  (AP Photo/Mark Lennihan, File)ASSOCIATED PRESS

The S&P 500 Index fell 0.8% on Friday, erasing 2018 gains as the index of large cap U.S. stocks has returned -0.1% year-to-date, and is now 9.9% below its all-time high hit on September 20. The story is similar for the Dow Jones Industrial Average, which closed Friday 8.6% below its September high. Mega-sized technology stocks in the Nasdaq are still higher by 2.8% for the year, but they’ve been thrashed the worst since the market topped, down 13.8%.

Times like these make you appreciate stocks that pay you to own them. Dividends and dividend growth account for nearly half of the total return from investing in U.S. stocks since 1926, and during periods of stagnant stock prices like 1965-1982 and 2000-2012 they are the only return you earn from owning stocks. With stock prices slipping, the good news is that companies are paying out more dividends than ever.


Janus Henderson this week released its Global Dividend Index for the third quarter of 2018, which tracks dividends paid by the world’s 1,200 largest firms by market capitalization. For the quarter just ended, payouts rose 5.1% to a record $354.2 billion, hitting new highs in the United States, Canada, Taiwan and India. Dividends paid by companies based in China grew 14.6% after falling for the past three quarters. Janus Henderson forecasts global dividends paid to hit $1.359 trillion for all of 2018, up 8.5% from last year.

Dividends in the U.S. rose 9.1% to a new high of $120 billion, but nearly half of the increase was accounted for by a $5.3 billion special dividend paid by Dr Pepper Snapple when it was acquired by Keurig to form Keurig Dr Pepper (KDP). Only one company in 70 cut its dividend. European companies typically pay dividends twice per year in the second and fourth quarter, but companies that did pay a dividend in the July-September period show strong growth. Payouts in the United Kingdom were higher by 11.1%.


Over a long period of time, dividend growth can give your returns a boost, and the recent market turbulence shows that stocks with a history of higher payouts do a decent job withstanding stock price declines. Stock market averages hit their highs on September 20, and since that time, the S&P 500 Index has fallen by 9.9%. By comparison, the ProShares S&P 500 Dividend Aristocrats (NOBL) exchange-traded fund is down 6.1%, and NOBL is up 1.3% for the year.

From the top 25 holdings of NOBL are six stocks below that have managed to post positive returns since the market’s top two months ago. If you’re looking for stocks with proven defensive mettle that gush dividends, this list is a great place to start. Worth noting is the relative strength of high-yielding utilities (XLU) and real estate investment trusts (ICF) included in this list, sorted by total return since September 20.

Total Return data from FactSetFactSet

John Dobosz is editor of Forbes Dividend Investor and Forbes Premium Income Report. Click here for a special offer with a money-back guarantee to subscribe to Forbes Dividend Investor and Forbes Premium Income Report.