MERITS OF DIVIDENDS

Dividends are always a positive contribution.

Unlike price appreciation, which can go negative, dividends are always a positive contributor to total returns.

Since 1926, the S&P 500 has averaged annualized returns of about 10%, with dividends, accounting for approximately 42%1 of the total return. The contribution of dividends to total returns, each decade and over the entire time period, is illustrated by the blue column. The contribution of price appreciation is highlighted by the green column.

As you can see, dividends matter.

CONTRIBUTION OF DIVIDENDS TO THE S&P500® TOTAL RETURN(1926-2018)

1Source: 2018 Stocks, Bonds, Bills & Inflation® (SBBI®) Yearbook. Bloomberg. The S&P 500® Total Return Index assumes reinvestment of dividends, includes capital gains and does not reflect the effect of taxes and fees. Indexes are unmanaged and not available for direct investment. Past performance does not guarantee future results.

SIGNIFICANT CONTRIBUTION

To total returns over time.

The ability to reinvest dividends has had a significant impact on an investor’s ability to create wealth in the stock market.

For example, if an investor had purchased one theoretical share of the S&P500 index on December 31, 1978, it would have cost them about $96.11. 40 years later, on December 31, 2018, that one share of the S&P500 would have appreciated to nearly $2,506.85 If the investor had been able to reinvest those dividends in the index, their investment would have grown to over $7,500.

IMPACT OF DIVIDENDS ON TOTAL RETURNS

GROWTH OF A HYPOTHETICAL INVESTMENT IN THE S&P 500 INDEX, REINVESTING DIVIDENDS (12/31/1978– 12/31/2018)

Growth of the S&P 500 Total Return Index assumes reinvestment of dividends, includes capital gains and does not reflect the effect of taxes and fees. Source: 2018 Stocks, Bonds, Bills & Inflation® (SBBI®) Yearbook and Bloomberg. Indexes are unmanaged and not available for direct investment. Past performance does not guarantee future results.

DIVIDEND GROWERS

Outperform over time.

Companies that increase their dividends have historically performed better than companies that do not. ThomasPartners Strategies seek to select companies that have exhibited the ability and willingness to grow their dividends over time, as these companies are consistent with ThomasPartners’ objectives of current income, income growth, and competitive total returns over time. Because past dividend growth is no guarantee of future dividend growth, ThomasPartners’ investment analysis includes forecasting a company’s capacity and propensity to grow their dividend in the future.

NOT ALL DIVIDEND PAYING STOCKS ARE THE SAME

HISTORICAL TOTAL RETURNS OF STOCKS (1981–2018)

Source: Ned Davis Research. S&P Capital IQ Compustat. S&P Dow Jones Indices. Copyright 2019 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/. Starting in Q1 2019, this chart has been updated to reflect a new data source and independent calculation methodology by a third party. As such, the composition of the four categories is different than in prior quarters and has affected the trend in returns from prior quarters. The 'Dividend Growers' and 'Non-Payers' groups' returns are now generally lower than under the previous calculation methodology. The 'No Change' and 'Dividend Cutters' groups' returns are now generally higher than under the previous calculation. The 'Dividend Cutters' group showing the largest change in returns. Please see additional explanatory notes and disclosures at the Disclosures link for more information. Past performance does not guarantee future results.