Dividend stocks, especially those with high yields, attract investors for their income generation and potential for total return, which encompasses both capital gains and dividends. Historically, dividends have contributed significantly to the S&P 500's total return. A recent study highlights the performance gap, showing that dividend-paying stocks had an annualized return over 50 years that was more than double that of non-dividend stocks. High-quality stocks paying 8% or more dividends are recommended for those pursuing passive income, though they do come with higher risks.
Investors favor high-yield dividend stocks for income and potential growth; higher dividends increase total return expectations, which include income and stock appreciation.
Since 1926, dividends have constituted 32% of total return for the S&P 500, highlighting the importance of sustainable dividend income for long-term investors.
A recent study revealed dividend stocks offered an annualized return of 9.18% from 1973 to 2023, significantly outperforming non-paying stocks which returned 3.95%.
For investors seeking passive income, quality stocks with at least 8% dividends can provide solid revenue streams, albeit with higher risk.
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