First Niagara Financial: The Impact of Dividends on Returns

|
 |  About: First Niagara Financial Group Inc. (FNFG)
by: Dirk Quayle, CFA

In my last article, I analyzed the top Small Cap dividend stocks in the Perkins Small Cap Value Fund. While most investors know intuitively that dividends have a significant impact on returns, I found a great example among one of the fund's holdings illustrating this point, which make it worth sharing.

First Niagara Financial Corp (NASDAQ:FNFG) has raised dividends a total of 45% over the past 5 years. At the same time, its stock price during the past 5 years has shown almost no price appreciation. Note the 5 year chart (click to enlarge), below.

Click to enlarge

A return of approximately 0% without dividends based on the price chart above.

So how did the dividends help? In the table below (click to enlarge), note that FNFG provided a return of 14.8% and beat its benchmark by 11.8% over the 5 year time frame! All that return came from the stock's dividends (dividends included in the calculations below).

Perkins Small Cap Value - Top Dividend Stock Holdings

Click to enlarge

It is difficult for most investors to get the actual return calculation that considers the dividends. At my brokerage the performance would show the 0% return and not consider the dividends' impact on the return. Another option for investors wishing to understand the impact of dividend payouts on a stock, is to use the LikeAssets application now available in the Seeking Alpha app store. It is free and it can help you determine the true return of your dividends stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.