The Case for Dividend Stocks

Total Return

Based on D2’s research dating back to 1926, dividends have accounted for 44% of stock market returns while capital appreciation has contributed the remaining 56%. Income from dividends and capital appreciation are both important in total stock market return expectations.


Dividend stocks may provide upside potential with some degree of downside protection. During market declines, dividend paying stocks have historically outperformed non-dividend paying stocks. Receiving dividends in declining markets helps reduce portfolio volatility and may also provide the opportunity for additional capital appreciation as dividends are reinvested and compounded.


A diversified portfolio of dividend stocks may also offer a consistent stream of income. As companies raise their dividends over time, income investors have the opportunity for their dividend income to increase and keep pace with inflation.


$1,000 invested in large company stocks at year-end 1925 would have grown to $2,982,225 by year-end 2010 with dividends reinvested. Capital appreciation alone would have only grown to $98,545 over the same 85-year period.

Investment Objective

The portfolio seeks capital appreciation and dividend income. The portfolio is suitable for investors with at least a three to five year time horizon.

Portfolio Features

  • Current Yield targeted above U.S. Treasury benchmarks
  • Dividend Focused
  • Cash Flow Driven
  • Broadly Diversified
  • Actively Managed
  • Inflation Hedge
  • Tax Efficient
  • Low Turnover

Investable Universe

  • Market capitalization greater than $500 million
  • Minimum 10 year dividend history
  • Predictable dividend policy
  • Sustainable operating cash flows to fund current capital expenditures, pay dividends and manage debt
  • Acceptable debt to operating cash flow multiples

Investment Process

  • Equal weight 50 highest dividend yielders
  • Cap sector & industry weightings at 20%
  • Reinvest dividends periodically or pay-out quarterly
  • Rebalance by repeating process every 13 months


Contact David Strohecker, CFP at (904) 248-9871 to learn more about the Dividend Portfolio.

See our Disclosures page for a discussion of the potential risks of investing in the Dividend Stock Portfolio.