The Dividend Dilemma

How to use dividend-paying stocks as a core holding without significantly lagging the market.

WHAT YOU NEED TO KNOW

Dividend-paying stocks can be an attractive core holding in client portfolios, but their performance disparity with major large-cap benchmarks can make them difficult to incorporate for asset allocators.
Much of the performance discrepancy between dividend-paying stocks and the Russell 1000 Index is due to the tech sector more than doubling in weight in the Index over the past 10 years.

Dividend-paying stocks have a long history of outperforming non-dividend paying stocks—and with less volatility.¹ Dividends have also been an important part of total return in the S&P 500 Index: Going back to 1940, 34.46% of the S&P 500 Index’s² total return can be attributed to reinvested dividends and the power of compounding.³ It’s no surprise, then, why many investors and asset allocators have chosen to use dividend-paying stocks as a core holding in their portfolios.

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¹ Based on a study by Ned Davis Research on the dividend policy of S&P 500 Index stocks from 1973-2023.

² S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.

³ Data Sources: Compustat and Hartford Equity Modeling Platform, 1/24.

Important Risks: Investing involves risk, including the possible loss of principal. • For dividend-paying stocks, dividends are not guaranteed and may decrease without notice.

The views and opinions expressed herein are those of the author and are not necessarily indicative of those of all Hartford Funds’ portfolio managers and sub-advisers and may not be reflected in the strategies and exchange-traded products that Hartford Funds offers.

This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. This information should not be considered investment advice or a recommendation to buy/sell any security. In addition, it does not take into account the specific investment objectives, tax and financial condition of any specific person. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. This material may not be copied, photocopied or duplicated in any form or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds.

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