Summary
Dividend income is often overlooked amid gyrations in the stock market. But dividends are an important element of return. Dividend income accounted for 42% of the total return of the S&P 500 between 1930 and 2012, according to Hartford Funds. And that’s just the average. In some of those decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for a smaller portion of returns, at around 15%-20%. Not for nothing, in 2022, dividend payments softened the blow when most market indices turned bearish as the Federal Reserve hiked interest rates. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks. High-yield stocks typically have dividends that pay out in the 5%-8% range. Though the income appears attractive, the share prices of high-yield stocks could signal some risks. Dividend-growth stocks typically have lower yields, often in the 1.0%-2.5% range. But the lower-yie
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