Dividend-paying stocks are the Volvo of equities — boring but powerful

Nice to have in strong markets

Although dividend contributions to total market returns have been substantial over the past several decades, this contribution has tended to substantially vary over shorter sub-periods. As the accompanying table shows, dividends tend to play a smaller role in times of strong price appreciation. By contrast, dividends play a far more substantial role during periods when capital gains have been muted.

It goes without saying that when prices fall, dividends have been of paramount importance for the simple reason that they’re the only things equity investors have going for them.Memories become short when non-dividend-paying growth stocks deliver outsized gains, and it becomes tempting to ignore the benefits of equity income. More recently, stupendous gains in the megacap Magnificent 7 growth stocks make dividend-paying stocks seem like quaint artifacts from an earlier time.

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