Stocks that pay high dividends can provide comfort during times of market turmoil. It is much easier to be patient if money is rolling in, and a strategy of reinvesting dividends may outperform when the broader market falls.
But the last thing an investor wants to see is a dividend cut, and a surprise dividend cut can be punishing for a stock’s price. At a time when Intel was laying off employees to cut costs, paying $6 billion a year in dividends didn’t appear viable. Some investors anticipate a recession in light of soaring interest rates. According to the UBS strategists, “dividend stocks outperformed the market by 4.5%, with high quality dividend stocks up 7.5% on a relative basis” during recessions in 2001, 2008 and 2020.