In a post last month, we highlighted the fact value strategies and dividend paying strategies were lagging both the S&P 500 Index and the S&P 500 Growth Index over the past twelve months. Frequently, value type stocks have a dividend component that provides additional return for investors.
Further confirmation that dividend paying strategies have been under-performers can be seen below. S&P Dow Jones Indices reports the average performance of the dividend payers in the S&P 500 Index have lagged the non payers by a wide margin, both year-to-date and over the course of the past twelve months as of April 30, 2015. For the one year period the payers return of 12.85% falls far short of the non-payers return of 20.64%.
From The Blog of HORAN Capital Advisors / Source: S&P Dow Jones Indices
This difference in return for the average or equal weighted return versus the cap weighted return noted above has carried over to the the performance of the Guggenheim S&P 500 Equal Weight ETF (NYSE:RSP)) return versus the capitalization weighted S&P 500 Index. As the below chart shows, the equal weight index has outperformed the capitalization weighted S&P 500 Index for the past year and a half.
From The Blog of HORAN Capital Advisors
As the dividend paying stocks have been significant laggards relative to the non-payers, the recent outperformance of large value versus large growth since April, (via the iShares S&P 500 Growth ETF (NYSE:IVW) and iShares S&P 500 Value ETF (ARCA:IVE)), and noted in the below chart, may carry over to the dividend payers. Dividend focused investors would certainly relish an environment that closes the gap between the payers and non-payers returns.
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| From The Blog of HORAN Capital Advisors |