NEW YORK (Reuters) – Last year, the dividend-growth strategy was a speedboat navigating the doldrums of the stock market.
While plenty of investments sagged from the European and U.S. debt crises, a portfolio mostly in healthy companies paying solid dividends beat practically all comers. Although the Standard & Poor’s 500 stock index was flat in price return last year, dividend-oriented funds like the Vanguard Dividend Growth Strategy gained 9.43 percent.
Dividends are usually a good bulwark against most market storms, especially for income-oriented investors. Yet the overall strategy may not do as well in 2012.
“There’s a real possibility that dividend stocks could trail this year, but long term, dividends have accounted for nearly half of the S&P 500 investors’ total return,” according to Jack Ablin, chief investment officer of Harris Private Bank.
Last year, dividends accounted for all 2 percent of the S&P 500 index’s total return. This year, if the economy perks up, we may see capital appreciation dominate the big-stock index, or not, depending on whether euro zone angst gushes into North America and Asia.