Dividend Payers Underperformed In July

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Includes: XLK, XLP
by: David I. Templeton, CFA

Much is made by some investment managers that dividend payers hold up well in market downturns. Generally, we would agree that is the case; however, this performance advantage does not always bear out and one must look at the underlying cash flow of individual companies. A case in point is the performance of the payers in July.

As the below table shows the average performance of the payers underperformed the non-payers by almost two full percentage points. On a year to date basis the average return of the payers is also lagging the return for the non-payers. As the below performance table shows, most S&P 500 companies do pay a dividend. The difficulty with the safety trade in July was the fact some of the defensive sectors underperformed the overall S&P 500 Index. The staples sector is one of those defensive sectors and the relative performance versus the S&P 500 Index is noted below as well. In that chart, if the line is declining, the noted sector is underperforming the broader S&P 500 Index.

From The Blog of HORAN Capital Advisors
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Source: Dow Jones Indices

From The Blog of HORAN Capital Advisors
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One sector that performed well versus the overall S&P 500 Index was technology. At HORAN we do believe this sector continues to offer opportunities for investors.

From The Blog of HORAN Capital Advisors
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