Daily Management Review

US Dividend Aristocrats shares show record poor performance compared to broad market


Shares of the so-called US dividend aristocrats remain in decline after the crisis, while the broad market grew by more than 7%. The gap is close to that which Wall Street has not seen since 2007. Despite record low interest rates, investors have been slow to invest in companies that generously shared profits with shareholders in the past.

The S&P 500 Dividend Aristocrats Index, which combines the shares of so-called dividend aristocrats, has fallen by 0.7% since the beginning of the year, while US S&P 500 companies with the largest capitalisation have risen by 7.3%, The Wall Street Journal writes. This year's level of the dividend aristocrats’ gap from the wider market is approaching a level that has not been seen since 2007, the publication notes.

The "dividend aristocrats" include companies from the S&P 500, which have been paying and increasing dividends for at least 25 years. The papers of the "aristocrats" index companies have recently generated about 2.7 per cent of dividend yield, compared to 1.7 per cent for the S&P 500. However, this was not enough to convince investors. They took more than $40 billion from dividend-focused mutual funds and ETFs in 2020, WSJ notes citing Emerging Portfolio Fund Research. The outflow for approximately the same period last year was only $3 billion.

Investors are in no hurry to return to them even though they have fewer ways to generate high returns due to record low interest rates around the world, WSJ says. Many investors are afraid that companies that usually share profits steadily with shareholders will change their policies and prefer "dividend aristocrats" to technology companies that have recovered from the crisis faster than others, the publication notes.

source: wsj.com