The S&P 500 has an approximate 9.4% projected total return, consisting of about 7.4% in price appreciation, and about 2% in dividends (21% cash in hand, and 79% expected price gain).
Dividend stocks have an approximate 7.9% projected total return, consisting of about 3.9% in price appreciation, and about 4.0% in dividends (51% cash in hand, and 49% expected price gain).
These are not our predictions. They are the price predictions of the aggregate Wall Street analyst community, plus trailing yields.
How The Returns Were Projected
For dividends, we simply used 12-month trailing yields, acknowledging that dividend increases or decreases are not projected (although we expect a net increase).
For price appreciation, we used portfolio weights for stocks and Street Consensus 12-month target prices.
Using the Street Consensus for 12-month forward prices as reported by Yahoo Finance, and weighting those projections by the weight of stocks within the S&P 500 index; analysts in the aggregate project the S&P 500 (and therefore SPY and IVV) to go up in price by 7.4% over the next 12 months.
Using the same method, and the 75 dividend stocks in the Russell High Dividend index (proxy HDIV), analysts in the aggregate project that ETF (and by general implication, dividend stocks) to go up by 3.9% over the next 12 months.
Of course, anything can happen, and individual analyst views vary substantially. Also the importance of the individual analyst views within the street consensus varies greatly. However, taking what we can get, that's the allocation weighted, aggregate published opinion.
Note there was one stock in the HDIV portfolio for which we did not find a 12-month price target. We assigned a no-change value to the price of that stock. Similarly, there were 5 stocks in the SPY portfolio for which we found no 12-month price target; and we assigned a no-change value to each of these. We view that data deficiency to be immaterial.
We are not presenting this information as our opinion, but merely as mechanical processing of aggregate analyst views, which may be useful to have as a data point when forming your own view.
Disclosure: QVM has no positions in any security identified in this article as of the creation date (March 18, 2012).
Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.