• Products

    A Guide to Hartford Funds

    View Now >

  • Insights

    The Reimagined Human-Centric Investing Podcast

    See What's New >

  • Practice Management

    Applied Insights Team

    Learn More >

  • Resources

    Tax Center

    View Now >

  • About Us

    Be Human-Centric

    Learn More >

Life is often about give and take. You want a specific feature, but it only comes with the super deluxe model that’s out of stock, and who has time to wait? You end up shifting your expectations. 

There’s also a give and take element for investors. When market volatility looms, we look for ways to reduce risk in our portfolio, which could mean sacrificing growth potential. 

But, through dividend-paying stocks, investors may be able to have the best of both worlds. Not only do dividend-paying stocks offer growth potential, but they’ve also tended to be less volatile than the market overall—and while generally providing a source of income, too.

 

Generally Steady As They Go
Dividends are payments made by a company on a regular basis, often monthly or quarterly, to return some of their profits to shareholders. They’re typically offered by large companies with well-established financial footings. 

Because they’re generally the stalwarts of the business world, dividend-paying stocks have historically been less volatile than both the broader market and their non dividend-paying counterparts, which has helped them noticeably outperform (FIGURE 1).

Saving For a Rainy Day Could Pay Dividends

Thanks to a strong economic rebound off the 2020 recession, companies are sitting on all-time high amounts of cash.1 For now, companies may be waiting to see where the COVID-19 pandemic moves next. But as the outlook improves, increasing or initiating a dividend is a common use for corporate cash. 

FIGURE 1

Dividend-Paying Stocks Have Outperformed 
Growth of $10,000 (2000-2020)

Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. The equal-weighted index gives each of the 500 stocks in the S&P 500 Index equal statistical importance rather than weighting the stocks by market capitalization, as is typical. Ned Davis Research divided companies into two groups based on whether or not they paid a dividend during the previous 12 months: “dividend payers” and “dividend non-payers.” For each category, a total-return geometric average was calculated with monthly rebalancing. Data Sources: Ned Davis Research and Hartford Funds, 2/21.

In a low-interest rate world that’s keeping fixed-income yields underwhelming, cash-rich companies could be well-positioned to provide investors with a more attractive income stream than many fixed-income investments. 

It’s important to note that dividend payouts are a perk, not a guarantee. Companies can opt to pause payments if economic conditions sour, as some did at the beginning of the COVID-19 pandemic. In many cases, however, dividend payments quickly returned as the economy began to stabilize. 

As with all stocks, dividend-paying stocks are subject to the ups and downs of the stock market, so be sure you understand the risks before investing.


Best of Both Worlds?

In summary, dividend-paying stocks may offer investors growth with less volatility relative to their non-dividend paying peers, and with a source of income to boot. In other words, investors may be able to enjoy the benefits of many worlds.

 If you’re looking for ways to help reduce risk in your portfolio without giving up growth potential, contact your financial professional today.

 

Ask your financial professional if dividend-paying stocks are a good fit for your portfolio.

1 Source: US Federal Reserve as of 6/30/21

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

Important Risks: Investing involves risk, including the possible loss of principal. • For dividend-paying stocks, dividends are not guaranteed and may decrease without notice. • Different investment styles may go in and out of favor, which may cause a fund to underperform the broader stock market.

CCWP111   226020

 

 

The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, or ETF summary prospectus and/or prospectus, which can be obtained from a financial professional and should be read carefully before investing.

Mutual funds are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA/SIPC. ETFs are distributed by ALPS Distributors, Inc. (ALPS). Advisory services may be provided by Hartford Funds Management Company, LLC (HFMC) or its wholly owned subsidiary, Lattice Strategies LLC (Lattice). Certain funds are sub-advised by Wellington Management Company LLP and/or Schroder Investment Management North America Inc. Schroder Investment Management North America Ltd. serves as a secondary sub-adviser to certain funds. Hartford Funds refers to Hartford Funds Management Group, Inc. and its subsidiaries, including HFD, HFMC, and Lattice, which are not affiliated with any sub-adviser or ALPS. The funds and other products referred to on this Site may be offered and sold only to persons in the United States and its territories.

© Copyright 2021 Hartford Funds Management Group, Inc. All Rights Reserved. Not FDIC Insured | No Bank Guarantee | May Lose Value