Tuesday, November 18, 2008

Dividends as Defensive Buffers

Over at my blog, I have a series of posts that I call "The Dividend Key". In this series of posts I present the results from some research completed by Tweedy, Browne Fund Inc. In this research they show how dividends have performed and contributed to investor returns over the years. There is one particular bit of research that is especially poignant in this very volatile market.

In particular, this research proves how over time, dividends have provided a defensive buffer to investors. To be specific, the research shows that stocks with the lowest price to dividend (i.e. highest yield) performed the best in these down markets compared to other value investing strategies. Take a look at the image below to see how those stocks with a higher dividend yield have performed better than other strategies during bear markets:

At times it feels that this strategy is not working or that the end of the world is right around the corner. However, if historical research repeats itself then those of use using a dividend strategy will come out of this mess just fine.

This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.


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